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Allowing for Excise Duty not yet due

Selling items which are Duty Paid is straight forward as the expense of Excise Duty is already rolled into the Standard Cost therefore incorporated into the Cost Of Goods Sold expense when you run the COGS Journal. If, however, you have the luxury of deferring Excise by keeping newly imported or produced product “under bond” then how do you make allowance for the fact the you will eventually need to pay duty.

If your valuation does not include an allowance for duty, then it makes your margins look too high, if you do build in excise even though you haven’t paid it yet, you risk double expensing your excise. Here is a suggestion about how you might achieve both indicative gross profit reporting and correct expensing of Excise. **Please do not take this as financial advice, this is merely how you might use Vinsight to achieve this, you should always get accounting advice from you accountant.

The problem:
Before Excise actually becomes due at the time of shipping, your Standard Cost for you item does not allow for the Excise expense. This means the time between when you bottle or import an item your Gross Margins may appear inaccurate or overstated.

A potential solution:
Increase the Standard Cost of the item at the time of bottling or importation to make an estimate of this expense.

How to achieve this:
At bottling or import time, estimate the Excise per unit and apply a cost to the item to reflect this. Have this amount post to a “Excise not yet due” liability ledger account that reflects that amount of Excise that will/may be due in the future.
As each month’s deliveries occur and create a real Excise liability, run the Excise Assessment to determine the amount of Excise to pay, then raise an Account Payable invoice to the tax or customs department, and create a journal to reduce your “Excise not yet due”.


Description Ledger Account Type Ledger Account Name Amount
Bottling: Packaging Operation adds an Excise Item,
Operation Additive Report creates the Journal
Current Liability Excise Not Yet Paid Credit 1000
Current Asset Finished Items Debit 1000


Purchasing Under Bond: When you complete your purchase and receive your inventory,
Journal a Liability for anticipated Excise and add a share of this to the Standard Cost for the item you are landing
Current Liability Excise Not Yet Paid Credit 1000
Current Asset Finished Items Debit 1000

Cost of Goods Sold Report and Journal Current Asset Finished Items Credit 200
Expense COGS Debit 200

Run Excise Assessment to determine you Excise to pay

Paying the Tax Dept: Manually raise a Purchase Order to
your Tax Department for the Excise Amount from your Excise Assessment
Current Liability Accounts Payable Credit 200
Expense Excise Debit 200

Excise Assessment then post journal Current Liability Excise Not Yet Paid Debit 200
Expense COGS Credit 200

Excise Not Yet Paid Credit 800
Accounts Payable Credit 200
Finished Items Debit 800
Excise Debit 200



Create an “Allowance for Excise” Stock Item and set the “Asset Ledger” code in the item to the Liability Account “Excise not yet paid”.
If bottling then Mark this as “Is Packaging”” so you can apply it on Packaging Operations.

Create an “Excise” Stock Item and set the “Expense Ledger” code in the item to the Expense Account “Excise”.
Mark this as “Can Purchase” true so you can use it on Purchase Orders for Payables at the end of the excise duty tax period.

If bottling, use the “Allowance for Excise” on Packaging Operations by applying it to the items you are bottling.
If purchasing use the “Allowance for Excise” to journal against an increase in your Finished Items or Inventory for Sale Asset account.

Each month after you sell item, run your COGS journal as normal. The amount that you expense will include your allowance for Excise, so at this point you can consider the expense recognised

Run your excise assessment to ascertain your accurate liability to your Tax Authority. Take this balance and raise a Purchase Order or an Accounts Payable Invoice to with the “Excise” Stock Item.

At this point you will have double expensed the excise in both the payable and in the COGS journal,
so create a journal to reduce the “Excise not yet paid” and which ever you prefer of the COGS or Excise expense.