Accounting for foreign purchases

Accounting for foreign purchases

Ensuring complete registration of import documents before closing accounts: Accountants of companies that import raw materials needed for their production line or commercial goods from abroad should carefully perform the following steps:

For each imported shipment, open a unique detailed account under the prepayment account for foreign purchases.

Debit all expenses related to the shipment, including the following items, in this detailed account:
– Order registration fee
– Payment for the purchase of goods
– Currency transfer and conversion fees
– Transportation and insurance from the origin to Iran customs
– Customs duties
– Storage, standard and demurrage
– Shipping from customs to destination
– Other expenses related to purchase
After clearing the goods according to the green leaf date, transfer the prepaid account of that shipment to the purchase account.

If the time interval between clearance and delivery of the goods to the destination warehouse is long, you can use the goods in transit account instead of the purchase account and transfer the goods in transit account to purchase after delivery to the warehouse.

For each shipment, a file containing the following documents is prepared to be presented to the auditor during the tax investigation:
1- Proforma invoice
2- Invoice
3- Bill of lading
4- Customs green leaf
5- The picture of all customs and shipping expenses and…
6- Summary report including green leaf number, green leaf date, cottage number, evaluation number, currency amount, conversion rate, small expenses, price and Rial rate of each unit of goods.

It is recommended to study the related section of Accounting Standard No. 8 with imports.

The cost of inventory of materials and goods consists of the following items.
Clause 6. The cost of the inventory of materials and goods should include purchase expenses, conversion expenses and other expenses incurred by the business unit in the course of its usual activity to bring the goods or services to its current location and condition.

Purchase expenses
Clause 7. Purchase expenses include the purchase price and any other expenses such as duties and customs duties and shipping that are directly related to the purchase. Commercial discounts are deducted from the purchase price.

Clause 8. Some expenses as follows can be included in the purchase expenses if the relevant conditions are met:

a) The expenses of financing the import of materials and goods in the form of credit in the form of usances, provided that according to the relevant regulations, the said import is not allowed in the form of cash.

b) In exceptional circumstances, according to the requirements of Accounting Standard No. 16 as currency exchange rate, the claimed Riyal differences due to a significant increase in the official exchange rate (for example, from floating to export), provided that it is possible to allocate it to the purchase price of related materials and goods. .

Common and important mistakes of accountants in the foreign purchase process:

1- For example, if the invoice for imported goods is 10,000 dollars with a free rate, then definitely, including 3,500 tomans dollars and other shipping and customs fees and…
The total value of the cargo cannot be less than 40,000,000 tomans.
Make sure all purchase expenses are recorded in the consignment account.

2- The shipping, customs and clearance expenses of one shipment are not recorded in the account of another shipment.

3- The added value received in the customs green leaf should be separated and recorded in the prepaid account of the added value.