When purchasing tangible items (such as supplies or equipment), have you ever wondered which account code to use for the related freight and shipping charges?
Shipping costs incurred to deliver supplies or equipment need to be recorded to the same expense account code as the item which you are purchasing, regardless of whether or not the shipping charges were separately invoiced. See below for examples:
- If you purchase office supplies totaling $100 and incur an additional $4.95 charge for shipping, then the entire cost of the order ($100 + $4.95 = $104.95) should be charged to the 121100 “Office Supplies” expense account code.
- If you purchase office equipment for $900 and incur an additional $150 charge for freight, then the entire cost of the order ($900 + $150 = $1,050) should be charged to the 127010 “NC Office Equipment $1,000 - $4,999” expense account code.
- If you purchase a combination of consumable supplies and equipment items within the same order, then the shipping charges would simply be prorated to the various items within the order. For example, if you had a $1,000 order where you purchased $900 of office equipment (90% of the order) along with $100 of consumable office supplies (10% of the order) and were charged a total of $125 to ship all of these items, then that $125 shipping charge would be prorated as follows:
- 90% of the shipping charges ($112.50) would be allocated to the office equipment. Thus, a total of $1,112.50 would be charged to the 127010 “NC Office Equipment $1,000 - $4,999” expense account code.
- 10% of the shipping charges ($12.50) would be allocated to the office supplies. Thus, a total of $112.50 would be charged to the 121100 “Office Supplies” expense account code.
For further details on the proper way to determine the value of equipment or property, refer to the Equipment Acquisitions section of the Equipment Management webpage, along with Section 12.1.3 – Determine the Value of Equipment or Property within the Business and Financial Policies & Procedures.
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If you have additional questions, feel free to reach out to our subject matter experts within the Account Codes section of UAFR’s Who to Ask list.
