Voyage Account- Meaning and Its Accounting Entries Meaning of Voyage Account: The method of accounting followed by shipping companies is known as voyage accoun acc ountin ting. g. Shi Shippi pping ng com compan panies ies pr prepa epare re the their ir acc accoun ounts ts per period iodica ically lly and als also o prepare the results of each voyage separately. Shipping companies carry goods from one place to another. Some companies carry passengers also in addition to goods from one place to another place. In order to ascertain the result of operating a ship’s voyage, Voyage Account is prepared. The Voyage Account is a revenue account. It is important to note that there is no dierence in the manner of preparing accounts period!wise and voyage! wise. All e"penses connected with the voyage, such as port charges, wages and salaries of the cr crew, ew, cap captai tain n and oth other er sta sta, , tr trans ansshi shipme pment, nt, age agency ncy fee fees, s, pr provi ovisio sions, ns, loading and unloading charges, bunker and harbour wages, freight and insurance, insurance of the ship on a time policy according to duration of voyage, depreciation arising as a result of the #ourney, address commission paid to brokers bro kers for freight for the ship, commission to captain on net pro$t etc. are debited to concerned Voyage Account. All incomes such as freight on cargo carried, passage money, primate etc. are credited. Following are some of the items of income and expenditure peculiar to Voyage Accounts. Accounting Entries- Deit and !redit: Voyage Account is deited usually with the following items:
1. Bunker Cost: This is the e"penditure incurred on fuel oil, diesel, coal and fresh water used during the voyage. %ow!a!days oil and diesel are used in place of coal. The bin or storing place of coal is referred to as bunker. &ence the name bunker costs. 2. Port Charges: 'ort is used by the shipping companies for loading and unloading of goods and parking of ships, hence the charges paid for these purposes are known as port charges. 3. Depreciation: (epreciation of the ship for the period of voyage is calculated and charged to the Voyage Account. 4. Insurance: Insurance premium of cargo must be entirely debited to the concerned Voyage Account whereas the insurance charges of the ship are charged proportionately to each voyage on the basis of time of voyage. 5. Address Commission and Brokerage: This is payable to the brokers and agents who help the shipping company in procurement of cargo, i.e., freight or business. This is calculated at a certain per cent of the freight earned including the primage or surcharge and debited to Voyage Account. Address commission is payable to the )harterer whereas brokerage is payable to the agent of the charterer. 6. te!edoring Charges: The e"penses which are incurred in loading of goods on the ships and unloading of goods from the ships are known as stevedoring charges.
". Port Charges: These are the charges paid to port authorities for allowing the ship to use the port either for loading or unloading the cargo. *. Salaries and wages of the crew, captain and other sta. +. &arbour charges -. anager’s commission, if any. Voyage Account is credited usually with the following items: 1. #reight: The amount which is charged by the shipping companies for taking goods or cargo from one place to another is called freight. It is an income. 2. Primage: It is additional freight #ust like surcharge on freight originally collected for the captain of the ship, now!a!days it is treated as income of the shipping company. 3. Passage $one%: /are collected from the passengers travelled in addition to the fare collected for merchandise. 4. C&osing tocks o' tores( Pro!isions( Coa&( #ue& etc. 0enerally, voyage pro$t represents the e"cess of voyage incomes earned over the e"penses incurred for this purpose. 1ut if, however, the voyage is in progress, the incomes and e"penses relating to the un$nished voyage are carried forward to the ne"t year. 2"cess of credit side of Voyage Account over its debit side is pro$t on the voyage. 2"cess of debit side of Voyage Account over its credit side is loss on the voyage.
This pro$t or loss is transferred to 0eneral 'ro$t and 3oss Account of the shipping company 24'2%S2S 523AT2( T6 I%)6'32T2 7685%29 :A;
/reight 5eceived on Incomplete 7ourney
Though the entire freight
:including primage; being income, is credited to voyage account yet it is unearned income as the #ourney of the ship is incomplete and is re=uired to be carried forward. Instead of deducting from freight on credit side, a provision for freight :including primage; is made and shown on the debit side of voyage account under the heading >provision for Incomplete Voyage? :i.e. voyage in progress.; :1;
2"penses 5elated to Incomplete #ourney
incomplete #ourney is carried forward, it is desirable that e"penses relating to incomplete voyage are also carried forward so that matching concept may not be violated. The une"pired e"penses are credited to voyage account as >voyage in progress? in order to ascertain the correct pro$t of the period. The une"pired e"penses are to be carried forward on the basis of their nature as< i;
2"penses related to freight.
ii;
2"penses not related to freight :i.e. standing e"penses;
iii;
Actual identi$able e"penses.
:i;
2"penses 5elated /reight
agent’s commission and freight insurance; related to return #ourney are carried forward in proportion to freight of return #ourney to that of total freight of #ourney. /or e"ample, if the total freight is 5s. @,--,--including return freight of 5s. ,--,--- and the total e"penses are 5s.
,--,---. Then such e"penses related to return #ourney are calculated as follows< BC %ote
treated as part of Standing 2"penses. :ii;
2"penses %ot 5elated to /reight
:standing; e"penses to be carried forward depends upon the position of the ship and the amount of e"penses incurred. Some of the
possibilities are discussed as under< :a; Dhen return #ourney is incomplete
are for the entire voyage or till date< a.
Total e"penses of voyage given. Then the e"penses will
be B b.
2"penses till date given. Then only BC charged for the
e"penses :iii;
6ne round trip and single way
one round trip and she is on her half way back for single way and
:a; 2"panses of total voyage are given. In this case BC of the e"penses should be carried forward. The proportion of e"penses of incomplete #ourney to be carried forward is calculated as under< :b; 2"penses are given till date. In this case B@ of the e"penses should be carried forward. The proportion of incomplete #ourney to be carried forward is calculated as under<
)alculation of Voyage in progress
case, pro$t can be easily calculated by deducting e"penses incurred from the revenue earned. 1ut in case of incomplete #ourney,
it is against the fundamental principles to consider all the revenues for the current year even when one knows that part of the voyage will be completed in the ne"t year. In such a case, pro$t will be calculated after crediting e"penses related to incomplete voyage and debiting the freight and primage related to same part in the voyage account.
;
Treatment of incomes
money are credited to the voyage ABc. In case of incomplete voyage, the unearned incomes are to be carried forward. /or this, a provision for freight and primage, yet to be earned, is made on the debit side. It is called 'rovision for incomplete voyage. ;
Treatment of 2"penses
incomplete voyage are also to be carried forward. The e"penses
related to the incomplete part are credited to the voyage account under the heading voyage in progress.’ 2"penses may be categorised as follows< :i;
2"penses related to freight.
:ii;
2"penses not related to freight. These e"penses may be treated as follows
:i; 2"penses 5elated to freight
unearned. These e"penses include
address commission. Agent’s commission, freight insurance etc.
:ii; 2"penses not related to freight
These e"penses are also known as standing charges
The treatment depends upon the situation of the ship
Dhen return #ourney is half!way or is incomplete< In this case half
of the e"penses incurred are carried forward as une"pired. 6ne round trip and single way< In this case BC rd of e"penses
:ii;
incurred are carried forward as une"pired.
:iii;
Treatment of e"penses when e"penses are given till dateBe"penses
for entire voyage are not given. Again, the treatment depends upon the situation of the ship<
Dhen return #ourney is half!way back< In this case, the e"penses incurred till date are for BC part of the #ourney and return #ourney and return #ourney i.e. :B; of it is incomplete. Thus, the ratio
of e"penses will be taken as under. Thus, one third e"penses are carried forward. Dhen ship has taken one round trip and is half way back< In this case. 2"penses incurred are for part of the #ourney and the half :B; is for the incomplete part. The ratio will be calculated as under. Thus, one $fth of e"penses are carried forward.
I&&ustration: India Shipping )ompany of 1ombay had a ship by name 1harat, whose written down value as on st 7uly --@ was 5s F lakhs. The ship was insured for 5s. Clakhs at G for voyage policy of hull. The ship made a trip to Sydney and returned to adras during the period st 7uly --@ to C-th Sept. --@.
"he particulars relating to the #oyage are gi#en elow: $. Expenses incurred:
. Stevedoring at the rate of 5s. C per tonne. C. (epreciation was charged on the written down value of the ship at the rate of -G p.a. F. The freight was insured at G.
%. "he particulars of the freight consisted of the following: :a; 3eather goods ,-- tonnes at the rate of 5s. - per tonne. :b; )otton @-- tonnes at the rate of 5s. @- per tonne. :c; Sugar ,H-- tonnes at the rate of 5s. -- per tonne. . In addition to primage J -G, the brokerage payable was J @G. 'repare Voyage Account for the three months.
