How to recognise internal transportation cost (between own warehouses)?

Question

As aditional pruchase cost and increase the value of inventory or as cost in the period it was expenced

Capitalise-versus-Expense Decision

Comments

What is the purpose of this transportation? Is it purchasing centrally and later distributing to the relevant warehouse?

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Yes, there is production in south of the country and than the goods are transported to the north of the country, from where the distribution to the external client takes place.

Answer 1

If the transportation cost is mandatory to complete the production of inventory, or if the inventory is ready for sale but no market is available in area accordingly it is transported to market to be ready for sale then it is part of cost

If transported due to shortage of inventory in other warehouse then it is expense

Answer 2

The cost shall be added to the cost of inventory in case it was internal costs, while in case it was external it should be in the selling and marketing expenses

Answer 3

We can capitalize such expenses only with regard to a fixed asset. There is no such thing as capitalizing something to non-capital asset such as inventory. I think you should take it as a production overhead expense.