by 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 voyage-wise.
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:
Bunker Cost:
This is the expenditure incurred on fuel oil, diesel, coal and fresh water used during the voyage. Now-a-days oil and diesel are used in place of coal. The bin or storing place of coal is referred to as bunker. Hence the name bunker costs.
Stores: Stock of store is purchased during the year for the use during the period of voyage. Stores consumed are calculated as:
(Opening stock+ Net Purchases- Closing Stock)
Port Charges:
Port is used by the shipping companies for loading and unloading of goods and parking of ships, hence the charges paid for these purposes are known as port charges.
Depreciation:
Depreciation of the ship for the period of voyage is calculated and charged to the Voyage Account.
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.
Address Commission and Brokerage:
This is payable to the brokers and agents who help the shipping company in procurement of cargo, i.e., freight or business. This is calculated at a certain per cent of the freight earned including the primage or surcharge and debited to Voyage Account. Address commission is payable to the Charterer whereas brokerage is payable to the agent of the charterer.
Address Commission = (Freight+ Primage)* Rate/100
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:
These are the charges paid to port authorities for allowing the ship to use the port either for loading or unloading the cargo.
Salaries and wages of the crew, captain and other staff.
Harbour charges
Manager’s commission, if any.
Primage:
Primage is also known as surcharge. It is the additional freight collected as a percentage of the amount of the freight. It is calculated as:
Primage = Freight*Rate/100
Voyage Account is credited usually with the following items:
- Freight:
The amount which is charged by the shipping companies for taking goods or cargo from one place to another is called freight. It is an income.
- Primage:
It is additional freight just like surcharge on freight originally collected for the captain of the ship, now-a-days it is treated as income of the shipping company.
- Passage Money:
Fare collected from the passengers travelled in addition to the fare collected for merchandise.
- Closing Stocks of Stores, Provisions, Coal, Fuel etc.
Generally, voyage profit represents the excess of voyage incomes earned over the expenses incurred for this purpose. But if, however, the voyage is in progress, the incomes and expenses relating to the unfinished voyage are carried forward to the next year.
Excess of credit side of Voyage Account over its debit side is profit on the voyage. Excess of debit side of Voyage Account over its credit side is loss on the voyage. This profit or loss is transferred to General Profit and Loss Account of the shipping company.
Voyage in Progress
Suppose one voyage has to complete by going to Landon from Mumbai and then return from Landon to Mumbai. At the end of year, if traveling from Landon to Mumbai is continuing, at that time, we have to calculate expenses and incomes on incomplete voyage and treat according to accounting rule.
(A) Receiving of Advance Income: We will deduct advance income of incomplete voyage from total voyage income or show in the debit side of voyage account.
(B) Paying of Advance Expenses: We also will deduct advance expenses of incomplete voyage from total voyage expenses or show in credit side of voyage account.
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