Excise Duty

[billm]

I am book-keeping for a small wine importing business which uses the Customs and Excise occasional scheme (advance payment) for collection of excise duty. At the moment, I have a series of items set up in QB2002 for the various rates of duty/bottle; these items are assigned to Cost of Sales. When I raise a purchase order for the wine with our supplier, I simultaneously raise a bill and prepare a cheque for Customs and Excise for the duty on the consignment. That way, the duty correctly appears correctly as a cost of sales in the P&L alongside the actual cost of the wine. However the P&L correctly reflects the cost of the wine actually sold (from invoices) as each bottle is treated as a stock item, but the amount of duty is shown as a bulk payment which may include bottles purchased but not yet sold. Is there any easy way of tying up the duty paid with each bottle as it is sold to give a more accurate P&L?

[hartford]

Hi billm
That's an interesting question. In short I think the answer is no there is no "easy way"
I have been using a wine importer with multi-currency and stock control as my QB 2003 guinea pig hence my interest.
QB picks up the cost of stock from your wine import invoice. I think your point is you need to add the cost of the excise duty to this rather than write this off as it is paid.
I believe the best and perhaps only way you can do this is as follows:-
a) set up a separate record on say Excel of the combined wine + excise duty cost per unit (case or bottle or half bottle) and keep this updated.
b) Every time you purchase wine/receive stock and after you have entered the invoice/updated the stock, go to Suppliers>Stock Activities>Adjust Qty/Value in hand>Tick Value Adjustment> Set the Adjustment a/c to the same as your COGS Duty a/c (whew!) - then adjust the value (the cost) to the correct wine + excise duty cost figure you are maintaining in Excel.
As you probably know QB2003 values stock on an average cost basis, don't ask me how but where stock costs are rising sharply this could overstate profits. You have to be alert for large cost variations to avoid this type of accounting problem.
This whole exercise on the large number of stock lines kept by my wine importer would be a bit of a nightmare. However they keep most of the wine in bond and pay the excise at the point of sale when the wine leaves the bond. Hence I don't actually use the above method but in theory it should work.
Has anyone else delved into stock more deeply and got a better solution?

[gibbo]

Excise is like Sales Tax rather than VAT - as it is considered to be a cost of the goods. Can you use the sales Tax and set up a Sales Tax Item (rather than a VAT item), then use a Group tax item that you attach to the stock item wnen you need to bring it in including Excise? I have not tried this, so I don't know what will happen.
The old versions of QuickBooks allowed you to post tax to a nominated account- it now only posts where it says it must go. Even exporting, altering and importing doesn't work for accounts on tax codes. It appears to be hard-coded in the programme.

[hartford]

Hi Gibbo
That sounds a hairy solution - you have to be very careful when fooling an accounting system as it often bites back!

[gibbo]

Sometimes the only way to get the information into QuickBooks correctly is to push it to places it never expected to go. In fact we have found that sometimes the only way is to import into QuickBooks a transaction that the programme will not allow from within. The issue really is about being able to do within your accounting programme what you need to do to have the information report correctly. It is frustrating to be told you cannot do this. eg a discount on a Cost of Goods Sold - for some reason they forgot retailers when they wrote the programme. Also when you have to have a GST (or VAT) that you forgot to charge on an invoice and want to add as just a tax charge. These things actually happen. There should be a way to do them.
If excise has to be treated in a particular way, in normal practice within the counrty, then the accounting programme should be able to cope! But if it can't then we have to find a way to make it happen.

[RobJoy]

My client imports metal tube, bar & sheet from the USA, subject to varying levels of duty which are paid on a deferrment account (all a month's VAT and duty paid by direct debit on the 15th of the following month). I have to account for COGS including a variable exchange rate, packaging (etc), freight charges and duty, on top of the material cost which QB does itself on an average cost basis.

The company has an Approach package which accounts for stock cost on an actual (as opposed to average or LIFO) basis, and I have added to this with an Access application. I can now calculate (relatively easily) the exact cost per foot/pound/metre/kilo of every imported item, and therefore make stock value adjustments and journal adjustments to stock asset and COGS at the end of each month so that the other package and QB agree exactly on stock value and to within a tiny percentage on GP. I can match QB's duty and carriage by invoice in a month to the other package's duty and carriage by item (to within rounding errors).

This is a developed version of Hartford's Excel-based solution. We used to create spreadsheets to do this, starting with one for each purchase order, then splitting it up by delivery, but it got very complicated and difficult to handle, and therefore error-prone. It has taken us a couple of years to get the system to this point, so if you want help, we've invented this particular wheel!

[billm]

Thanks for all these helpful replies. I have now discovered that QB 2003 allows you to create assemblies from piece parts. I am going to "buy in" Excise Duty in "per bottle" units and then create assemblies consisting of 12 bottles of wine and 12 units of duty. Invoices show only the description and selling price of the assembly; COGS will show the buy-in price of wine and duty. My problem solved, I think!

[hartford]

Hi Billm
Sounds an interesting solution which I will look at. Please keep us informed of how you get on.