Inventory in transit: building a landed-cost record before goods arrive

Goods can be in transit while already belonging to the company, or arrive physically before the accounting treatment is settled. Review purchasing and shipping terms with the responsible adviser to determine when ownership and obligations arise.

Maintain a shipment register with purchase order, vendor invoice, quantities, departure and expected arrival dates, destination, and supporting terms. The warehouse's on-hand count will not include every item that may belong in the closing record.

Collect purchase price, freight, duties, and other costs considered under the applicable inventory policy. Identify credits, discounts, and amounts that relate to several shipments. Ask the reviewer which items should be included and which are period expenses.

For an illustrative shipment of 500 units, a $5,000 purchase plus $700 freight and $300 duties produces $6,000 of potential landed cost, or $12 per unit, if all those amounts belong in inventory under the policy. Using the $10 purchase price alone changes the margin when the units sell.

A freight bill covering several products may need allocation by weight, volume, units, or another defensible driver. A customs duty may relate to the declared item value or classification. Keep the allocation basis with the calculation.

Apply the method consistently and review exceptions when a product is unusually heavy or valuable. A convenient equal split can materially distort product-level margins.

Match the received quantity to the purchasing record, identify shortages or damage, and record claims or credits separately. Confirm whether invoices, deposits, and final payments were already entered in the ledger before creating a receiving adjustment.

At month-end, review shipments around the cutoff with the accountant. Retain the source documents behind any stock-in-transit balance and explain material differences from goods counted at the warehouse.

Freight and duty invoices sometimes arrive after products are available for sale. Track missing costs and follow the approved adjustment policy when the amount becomes known.

Review the register until the shipment, landed-cost calculation, payables, and inventory record agree. The process should leave both an explained total balance and a usable cost per product, with estimates clearly distinguished from final amounts.