Process of preparing voyage account

What is a Voyage Account? Explain the procedure of preparing voyage accounts. ( December- 2023 ) Process of preparing voyage account

1. Meaning of Voyage Account

A Voyage Account is a special nominal account prepared by shipping companies to ascertain the profit or loss on a particular voyage of a ship.

• It is prepared separately for each voyage (e.g., Voyage No. 1 from Mumbai to Dubai).
• All incomes of that voyage (freight, passage money, primage, etc.) and all expenses of that voyage (bunker/fuel, wages, port charges, insurance, etc.) are collected in this account.
• The balance of the Voyage Account shows profit (if credit > debit) or loss (if debit > credit) on that voyage.

2. Standard Format of Voyage Account

Heading:

Voyage Account of S.S. ______
Voyage No. ___ from ___ to ___

You can show it like a normal ledger account:

Voyage Account of S.S. Himalaya

Voyage No. 1 – From Mumbai to Dubai

Dr. Cr.

————————————————————-

Date Particulars Amt. Date Particulars Amt.

————————————————————-

To Bunkers (coal/oil) xxxx

By Freight on Cargo xxxx

To Wages & Salaries xxxx

By Passage Money xxxx

To Port Charges xxxx

By Primage xxxx

To Loading/Unloading xxxx

By Demurrage (if any) xxxx

To Stores Consumed xxxx

By Other Incomes xxxx

To Insurance – Ship xxxx

To Insurance – Freight xxxx

To Depreciation on Ship xxxx

To Address Commission xxxx

To Other Voyage Expenses xxxx

To Profit transferred to (if credit > debit)

General P&L A/c xxxx

—–

xxxx xxxx

————————————————————-

Or

By Loss transferred to

General P&L (if any)

3. Process of Preparing Voyage Account

Step 1: Identify the Voyage

• Decide which voyage you are preparing the account for.
  • Example: Voyage No. 5 – S.S. Himalaya from Kolkata to London and back.
• All incomes and expenses relating to that voyage only will be recorded.Process of preparing voyage account

Step 2: Open the Voyage Account

• Open a Voyage Account in the ledger headed with:
  • Name of the ship
  • Voyage number
  • Route (From…To…)

Step 3: Record All Voyage Expenses on the Debit Side

All direct expenses incurred for that voyage are debited to Voyage Account. Common items:

1. Bunkers / Fuel / Coal / Oil
   
   • Cost of fuel consumed on that voyage.
   • Entry:
     • Voyage A/c Dr. To Cash/Bank/Creditors
2. Wages and Salaries of Crew
   
   • Salaries of captain, engineers, sailors, stewards, etc. for that voyage. Process of preparing voyage account
3. Port Charges / Harbour Dues
   
   • Paid at ports for using port facilities.
4. Stores Consumed
   
   • Food, beverages, medicines and other consumable stores used for crew and passengers.
5. Loading and Unloading Charges
   
   • Stevedoring and handling expenses for cargo.
6. Insurance – Ship & Freight
   
   • Marine insurance premium of the ship and freight for that voyage. Process of preparing voyage account
7. Depreciation on Ship
   
   • Depreciation on the ship for the period used in that voyage.
8. Address Commission
   
   • Commission payable to the agents on freight collected.
9. Other Voyage Expenses
   
   • Pilotage, towage, canal dues, repairs for voyage, etc.

👉 Rule:

All expenses specially incurred for that voyage are debited to the Voyage Account.

Step 4: Record All Voyage Incomes on the Credit Side

All incomes earned from that voyage are credited to the Voyage Account. Main items:

1. Freight on Cargo
   
   • Amount received (or receivable) from shippers for carrying goods.
2. Passage Money
   
   • Fares received from passengers.
3. Primage
   
   • Extra charge (usually a % on freight) payable to shipowner.
4. Demurrage (if any)
   
   • Amount received when charterer takes extra time beyond lay days for loading/unloading.
5. Other Receipts
   
   • Any other income related to that voyage.

👉 Rule:

All incomes earned from that voyage are credited to the Voyage Account.

Step 5: Adjustments for Outstanding / Prepaid Items

At the end of the accounting period, adjustments are made:

1. Outstanding Expenses
   
   • If some voyage expenses are incurred but not yet paid:
     • Add them to the debit side of Voyage Account.
     • Show them as liability in the Balance Sheet.
2. Prepaid Expenses
   
   • If any voyage expense paid in advance for next voyage:
     • Deduct/transfer the prepaid part from Voyage Account.
     • Show it as a prepaid expense (asset).
3. Closing Stock of Stores / Bunkers
   
   • If some stores or fuel are left unused at the end of voyage:
     • Deduct the closing stock from total stores/fuel expense.
     • Or credit Voyage Account with “By Closing Stock of Stores/Bunkers” and show stock as an asset.

Step 6: Treatment When Voyage is Completed within the Year

If the voyage is fully completed within the same accounting year:

1. Total the debit and credit sides of Voyage Account.
2. Compare:
   • If Credit > Debit → Profit on voyage
     • Show on debit side as:
       
       To Profit & Loss A/c
       
       
   • If Debit > Credit → Loss on voyage
     • Show on credit side as:
       
       By Profit & Loss A/c
       
       
3. Transfer the profit or loss to the General Profit & Loss Account.

Step 7: Treatment When Voyage is Incomplete (Voyage in Progress)

If, on the date of final accounts, the voyage is not fully completed:

1. Calculate the proportion of income and expenses that relate to the completed part of the voyage.
   
   • Basis may be:
     • Distance completed vs total distance, or
     • Days completed vs total days, or
     • Freight earned vs total freight expected.
2. For completed part:
   
   • Show related income and expenses in the Voyage Account and find profit/loss.
3. For incomplete part (Voyage in Progress):
   
   • The balance of expenses (and sometimes related income) is carried forward as “Voyage in Progress” or “Voyage Work-in-Progress”.
   • This is shown as an asset in the Balance Sheet. Process of preparing voyage account

Step 8: Closing the Voyage Account

• After recording all incomes, expenses, and adjustments, and transferring profit/loss to General P&L, the Voyage Account is balanced and closed. Process of preparing voyage account
• Now that voyage is fully accounted for.

Short Summary

• Voyage Account is prepared for each voyage separately to find out profit or loss on that voyage.
• All voyage expenses (fuel, wages, port charges, insurance, depreciation, etc.) are debited, and all voyage incomes (freight, passage money, primage, demurrage, etc.) are credited.
• When the voyage is completed, the balance is transferred to the General Profit & Loss Account; if incomplete, the unexpired portion is shown as Voyage in Progress (asset). Process of preparing voyage account

You can check the Syllabus of Financial Accounting on the official website of Gndu.

👉 Note ):- Important questions of Financial Accounting

1. What is capital expenditure, revenue expenditure and deferred revenue expenditure? Give characteristics of each. When are revenue expenses treated as capital expenses. ( December- 2023 )
2. What are Consignment Accounts? Explain accounting treatment of consignment transactions in the books of consignor and consignee. ( December 2024 )