Additional Expense Entry

Overview

The Additional Expense Entry in DIGITZ ERP is used to allocate indirect or additional costs associated with Purchase or Sales transactions.
These additional costs — such as freight, customs duty, transport, handling charges, insurance, or commissions — are proportionately distributed across the related line items of the linked transaction.

When applied to a Purchase transaction, it adjusts the valuation rate of the items; when applied to a Sales transaction, it impacts the cost of goods sold or associated ledger postings.
The system ensures accurate cost allocation and performs the necessary accounting entries automatically.

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Purpose

To ensure that all indirect costs related to procurement or sales are captured and properly reflected in the product’s valuation or profitability.
By allocating additional expenses accurately, businesses can maintain correct inventory values, cost of sales, and financial reporting without manual adjustments.

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How It Works

• The user creates an Additional Expense Entry and links it to one or more Purchase or Sales documents (such as Purchase Invoice or Sales Invoice).
• The total expense amount is then allocated to the items in those linked documents based on the weighted value of each line item.
• DIGITZ ERP automatically recalculates the valuation rate (in case of Purchase) or adjusts the sales cost impact accordingly.
• The system also posts all required ledger entries for both the expense and the affected accounts to ensure accounting consistency.

This ensures that all costs contributing to the procurement or sale of goods are accurately accounted for, providing a more realistic view of profitability and valuation.

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Key Features

• Allocation of additional expenses to Purchase or Sales documents.
• Proportionate distribution of expenses based on item value or quantity weightage.
• Automatic valuation rate recalculation for purchased items.
• Optional allocation to multiple transactions.
• Automatic and accurate ledger postings reflecting the impact of expenses.

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Expense Allocation Logic

• The system determines the total additional expense amount and distributes it proportionately to each line item in the linked transaction.
• The allocation is based on the weighted value (item-wise amount) of each line.
• For example:
  • If a Purchase Invoice has items worth AED 60,000 and AED 40,000, and an additional freight of AED 1,000 is added, then AED 600 and AED 400 will be allocated to each item respectively.
• This proportionate allocation ensures fair and consistent distribution of costs.

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Valuation Impact

• For Purchase Transactions:
  The additional expense amount is added to the item’s valuation rate, increasing its inventory cost.
  This ensures that landed costs such as shipping, insurance, or import charges are included in stock valuation.
• For Sales Transactions:
  The additional expense is treated as part of the selling cost or commission, impacting the cost of goods sold (COGS) or linked expense account as configured.

This process maintains accurate inventory valuation and profitability tracking throughout the system.

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Ledger Posting Behaviour

Upon submission, the system performs all relevant debit and credit postings automatically.

For Purchase-linked Expense Entry:

• Debit: Expense Account (e.g., Freight, Customs, Insurance)
• Credit: Payable or Payment Account (depending on configuration)

For Sales-linked Expense Entry:

• Debit: Expense or Adjustment Account (linked to COGS)
• Credit: Receivable or Other Income/Commission Account (as applicable)

These postings ensure both the valuation and accounting impact are properly reflected.

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Workflow

1. Go to Accounts → Additional Expense Entry → New.
2. Select the Reference Type (Purchase or Sales).
3. Choose the Linked Document (e.g., Purchase Invoice, Sales Invoice).
4. Enter the Expense Type and Expense Amount.
5. The system will automatically distribute the amount proportionately to the line items.
6. Review the allocations and save the document.
7. Submit the entry to update item valuations and post ledger entries.

Once submitted, DIGITZ ERP automatically recalculates the affected valuation or cost values and updates the financial ledgers accordingly.

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Integration

The Additional Expense Entry integrates seamlessly with:

• Purchase Invoice – For allocating indirect costs like freight or import duties.
• Sales Invoice – For recording post-sale costs or commissions.
• Item Valuation – Updates weighted average rates or COGS based on allocation.
• General Ledger – Creates automated journal entries for accounting impact.
• Inventory Reports – Reflects updated valuation in stock and profitability reports.

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Conclusion

The Additional Expense Entry in DIGITZ ERP ensures that all indirect costs are accurately incorporated into transaction valuations and ledger balances.
By automatically allocating expenses proportionately and updating both inventory and financial records, it provides precise cost tracking, enhances profitability analysis, and maintains complete accounting transparency across purchases and sales.