Voyage Account- Meaning and Its Accounting EntriesMeaning of Voyage Account: The method of accounting followed by shipping companies is known as voyage accounting. Shipping companies prepare their accounts periodically and also 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 difference in the manner of preparing accounts period-wise and voyagewise. All expenses connected with the voyage, such as port charges, wages and salaries of the crew, captain and other staff, transshipment, agency fees, provisions, 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 journey, address commission paid to brokers for freight for the ship, commission to captain on net profit 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- Debit and Credit: Voyage Account is debited usually with the following items: hence the charges paid for these purposes are known as port charges. 3.1. Address Commission and Brokerage: This is payable to the brokers and agents who help the shipping company in procurement of cargo. This is calculated at a certain per cent of the freight earned including the primage or surcharge and debited to Voyage Account. Hence the name bunker costs. Now-a-days oil and diesel are used in place of coal. i. Stevedoring Charges: The expenses which are incurred in loading of goods on the ships and unloading of goods from the ships are known as stevedoring charges. Port Charges: Port is used by the shipping companies for loading and unloading of goods and parking of ships. Address commission is payable to the Charterer whereas brokerage is payable to the agent of the charterer. 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. .. diesel. 6. 2. freight or business. 4. coal and fresh water used during the voyage. Depreciation: Depreciation of the ship for the period of voyage is calculated and charged to the Voyage Account. Bunker Cost: This is the expenditure incurred on fuel oil.e. The bin or storing place of coal is referred to as bunker. 7. Coal. Excess of debit side of Voyage Account over its credit side is loss on the voyage. Excess of credit side of Voyage Account over its debit side is profit on the voyage. Voyage Account is credited usually with the following items: 1. the voyage is in progress. But if. Fuel etc. voyage profit represents the excess of voyage incomes earned over the expenses incurred for this purpose. Primage: It is additional freight just like surcharge on freight originally collected for the captain of the ship. . Manager’s commission. Passage Money: Fare collected from the passengers travelled in addition to the fare collected for merchandise. Closing Stocks of Stores. Salaries and wages of the crew. 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. 2. 4. 8. captain and other staff. Freight: The amount which is charged by the shipping companies for taking goods or cargo from one place to another is called freight. the incomes and expenses relating to the unfinished voyage are carried forward to the next year. now-a-days it is treated as income of the shipping company. Harbour charges 10. however. Provisions. if any. 3. 9. Generally. It is an income. Then such expenses related to return journey are calculated as follows: 1/3 Note:. For example. 2.00.) (B) Expenses Related to Incomplete journey:.e.000 including return freight of Rs.00. 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.if the insurance premium on freight is paid on the policy on the basis of time. then freight insurance will be .If the income of the incomplete journey is carried forward. ii) Expenses not related to freight (i. it is desirable that expenses relating to incomplete voyage are also carried forward so that matching concept may not be violated.000. 1. 5.This profit or loss is transferred to General Profit and Loss Account of the shipping company EXPENSES RELATED TO INCOMPLETE JOURNEY (A) Freight Received on Incomplete Journey:- Though the entire freight (including primage) being income. if the total freight is Rs. is credited to voyage account yet it is unearned income as the journey of the ship is incomplete and is required to be carried forward.e.Expenses (as address commission. The unexpired expenses are credited to voyage account as “voyage in progress” in order to ascertain the correct profit of the period.00.000 and the total expenses are Rs. standing expenses) iii) Actual identifiable expenses. (i) Expenses Related Freight:. The unexpired expenses are to be carried forward on the basis of their nature as: i) Expenses related to freight. Instead of deducting from freight on credit side. voyage in progress. agent’s commission and freight insurance) related to return journey are carried forward in proportion to freight of return journey to that of total freight of journey. the proportion of non-freight (standing) expenses to be carried forward depends upon the position of the ship and the amount of expenses incurred. Expenses till date given.treated as part of Standing Expenses. In this case 1/5 of the expenses should be carried forward. (b) When return journey is half way back:.In such as case ½ of the standing expenses are carried forward. Total expenses of voyage given. The proportion of expenses of incomplete journey to be carried forward is calculated as under: (b)Expenses are given till date. Then the expenses will be 1/2 b. The proportion of incomplete journey to be carried forward is calculated as under: . Some of the possibilities are discussed as under: (a) When return journey is incomplete:. In this case 1/3 of the expenses should be carried forward.The treatment of expenses depends upon whether the expenses incurred are for the entire voyage or till date: a.Where the ship has completed one round trip and she is on her half way back for single way and (a) Expanses of total voyage are given. (ii) Expenses Not Related to Freight:. Then only 1/3 charged for the expenses (iii) One round trip and single way:. But in case of incomplete journey.Calculation of Voyage in progress:As we know that complete voyage means when journey of the ship has been completed and it reaches the destination. In such a case. 2) Treatment of Expenses:.Income like freight. (ii) Expenses not related to freight. the expenses of the incomplete voyage are also to be carried forward. a provision for freight and primage. In such a case. 1) Treatment of incomes:. It is called Provision for incomplete voyage. is made on the debit side. In case of incomplete voyage. The expenses related to the incomplete part are credited to the voyage account under the heading voyage in progress. the unearned incomes are to be carried forward. yet to be earned. These expenses may be treated as follows:- . 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 next year.’ Expenses may be categorised as follows: (i) Expenses related to freight. primage and Passage money are credited to the voyage A/c. profit will be calculated after crediting expenses related to incomplete voyage and debiting the freight and primage related to same part in the voyage account. profit can be easily calculated by deducting expenses incurred from the revenue earned.Like the incomes. For this. The amount of these expenses which is to be carried forward may vary in different situations. Agent’s commission. the expenses incurred till date are for 1/3 part of the journey and return journey and return journey i. Expenses incurred are for part of the journey and the half (1/2) is for the incomplete part. .e.Treatment of expenses when expenses for complete/entire voyage are provided. Thus. One round trip and single way: In this case 1/3 rd of expenses (ii) incurred are carried forward as unexpired. Thus. The treatment depends upon the situation of the ship:(i) When return journey is half-way or is incomplete: In this case half of the expenses incurred are carried forward as unexpired. Thus. the ratio of expenses will be taken as under.(i) Expenses Related to freight:. These expenses include address commission. (1/2) of it is incomplete. one fifth of expenses are carried forward. Again. freight insurance etc. (iii) Treatment of expenses when expenses are given till date/expenses for entire voyage are not given. one third expenses are carried forward. (ii) Expenses not related to freight:. When ship has taken one round trip and is half way back: In this case. The ratio will be calculated as under. These expenses are also known as standing charges:.All expenses related to freight are carried forward in proportion to the freight unearned. the treatment depends upon the situation of the ship: When return journey is half-way back: In this case. The ship was insured for Rs. The ship made a trip to Sydney and returned to Madras during the period 1st July 2005 to 30th Sept. The particulars of the freight consisted of the following: (a) Leather goods 1. . 4. Stevedoring at the rate of Rs. (c) Sugar 1. Prepare Voyage Account for the three months. 100 per tonne. 30 lakhs at 1% for voyage policy of hull. The particulars relating to the voyage are given below: 1. 150 per tonne. 3. the brokerage payable was @ 5%. (b) Cotton 500 tonnes at the rate of Rs.a. In addition to primage @ 10%. Depreciation was charged on the written down value of the ship at the rate of 10% p. The freight was insured at 1%.100 tonnes at the rate of Rs. 6. 120 per tonne. Expenses incurred: 2.Illustration: India Shipping Company of Bombay had a ship by name Bharat. 2005. whose written down value as on 1st July 2005 was Rs 24 lakhs. 5.700 tonnes at the rate of Rs. 3 per tonne.