How To Prepare Voyage Account and Its Terminologies

VOYAGE ACCOUNTING

Definition

A voyage account is prepared by those who engage in the business of marine ship to find the financial profit from the business. Both passengers and goods can be transported using ship.


A voyage account has to be opened for each traveling. All expenses incurred on voyage will but recorded in the debit side of voyage account while all incomes will be recorded in the credit side of the voyage account. Usually, total number of items in expenses is more than number of items in incomes.



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  Expenses include/Items Included In Voyage; 

1. Address commission
2. Brokerage
3. Remuneration
4. Insurance
5. Wages
6. Stores
7. Depreciation
8. Bunker cost
9. Port Charges

   Incomes include;

1.Passage Money
2. Freight
3. Primage

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Terminologies/Items Included:

1. Stevedores: These are employees hired for loading and unloading cargo.

2. Wharfage: This is the amount paid to Port authority for using a wharf.

3. Voyage: Transportation of goods and passengers via sea route by ship.

4. Stores: Expenses of using stores.

5. Brokerage and Address Commission: They are the payments made by the owner of the ship to an  agent. It is a percentage of income of a particular journey.

6. Freight: Amount received for transporting the goods. 

7. Depreciation: The ship is a fixed asset subjected to depreciation. It is calculated by using the formula:
       Total depreciation x Period of usage
                 12 months or 365 days                

 

Accounting Entries- Debit and Credit:

Voyage Account is debited usually with the following items:

1. Bunker Cost:

Bunker cost is the expenditure incurred on fuel, oil, coal, diesel and fresh water used during the voyage. These days, oil and diesel are used in place of coal. A place for storing coal is referred to as bunker. Hence the name bunker costs emerged.

2. Port Charges:

The shipping companies use Port for the loading and unloading of goods as well as parking of ships, Thus, the charges paid for these purposes are  called 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.

3. Depreciation:

Depreciation of the ship for the period of voyage is calculated and charged to the Voyage Account.

4. Insurance:

Insurance premium of cargo must be entirely debited to the concerned Voyage Account while the insurance charges of the ship are charged proportionately to each voyage on the basis of time of voyage.

5. Address Commission and Brokerage:

This is payable to the agents and brokers who help the shipping company in procurement of cargo, i.e., freight or business. This is calculated at a certain percentage of the freight earned including the primage or surcharge and debited to the Voyage Account. While, address commission is payable to the Charterer, brokerage is payable to the agent of the charterer.

6. Stevedoring Charges:

They are the expenses incurred in loading of goods on the ships and unloading of goods from the ships. They are referred to as stevedoring charges.

7. Salaries and wages of the crew, captain and other staff.
8. Harbour charges
9. Manager’s commission, if any.

Voyage Account is credited usually with the following items:

1. Freight:

This is the amount charged by the shipping companies for transporting the goods from one place to another. This amount charged by the shipping companies is called freight. It is an income.

2. 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.

3. Passage Money:

Fare collected from the passengers travelled in addition to the fare col­lected for merchandise.

4. 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 and vice versa. This profit or loss is transferred to General Profit and Loss Account of the shipping company.

             Preparation of Voyage Account

The voyage account is prepared on the lines of income statement. All expenses are debited while all incomes are credited with their respective items and the balance will show the profit or loss regarding the voyage.

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Example: A ship was chattered from Lagos to Accra on 31st December. The accounts were closed after the arrival of the ship. The details for the voyage to Accra and back were:

	$		$
Store consumed Coal consumed Depreciation Port charges Salaries of crew Insurance of ship Insurance of freight Address commission Fuel	7000 15000 6000 3000 8000 10000 5000 5% 1050	Freight	90000

 $40000 freight was received on return with 10% primage.

                 Voyage Account

  Dr.                Voyage Account                      Cr.

	$		$
Store consumed    Coal consumed   Depreciation    Port charge   Salaries of crew   Insurance of ship   Insurance of freight    Address commission    Fuel   NET PROFIT(bal. figure)	7000  15000  6000  3000  8000  10000  5000  4950  1050  39000	Freight  Primage	90000     9000
	99000		99000

1. Primage = 10% of 90000
2. Address Commission = 5% of (freight + primage)