What is Voyage in Progress? How is it calculated ? Illustrate your answer. Or Treatment of incomplete voyage account
Voyage in Progress
Meaning:
“Voyage in Progress or incomplete voyage ” refers to a voyage (journey by ship) that has not been completed by the end of the accounting period. In shipping business, each voyage is treated as a separate unit for calculating profit or loss. When a voyage is still going on at the end of the financial year, it is called a Voyage in Progress.
Meaning of Work in Progress in Voyage Account
In other words-
Work in Progress (WIP) in a Voyage Account refers to the expenses incurred on a voyage that is not yet completed at the end of the accounting period.
In simple words —
When a ship’s voyage is still going on (for example, the ship has not yet reached its destination or returned), all the expenses already spent up to that date are called Work in Progress. Lets know the treatment of incomplete voyage account
Key Points:
- Voyage not complete:
Work in progress arises only when a voyage continues beyond the balance sheet date.
- Represents partial cost:
It includes all voyage expenses (like coal, stores, port charges, crew wages, etc.) incurred till the closing date.
- Shown as an Asset:
Since these expenses will give benefit in the next accounting period (when the voyage completes), they are treated as Current Assets in the Balance Sheet under “Work in Progress.”
- Carried forward to next period:
In the next accounting period, this Work in Progress amount is transferred back to the Voyage Account to determine the total profit or loss of the completed voyage.
Example:
Suppose the following expenses have been incurred on an unfinished voyage as of 31 December:
- Coal consumed – ₹40,000
- Port charges – ₹10,000
- Crew salaries – ₹20,000
Total = ₹70,000
This ₹70,000 will be treated as Work in Progress, because the voyage has not yet earned its full income.
Journal Entry:
Work in Progress A/c Dr ₹70,000
To Voyage A/c ₹70,000
(Being expenses of incomplete voyage carried forward)
Balance Sheet Presentation:
→ Asset side under “Work in Progress – Voyage Account ₹70,000.”
In short:
Work in Progress in Voyage Account means the expenses of an incomplete voyage that are carried forward as an asset until the voyage is completed. Voyage in Progress or Treatment of incomplete voyage account
How it is Calculated
When the accounts are to be closed but a voyage is not yet complete, all expenses and incomes relating to that incomplete voyage are recorded up to the date of balance sheet.
The Voyage in Progress or incomplete voyage amount is calculated as follows:
Voyage in Progress = Expenses incurred up to date – Income earned up to date
If the expenses are more than the income, the difference is treated as Work in Progress (Asset) in the Balance Sheet.
If the income is more than the expenses, the difference is treated as Profit in Progress (Liability). Treatment of incomplete voyage account
Illustration
A ship “S.S. Himalaya” started a voyage from Calcutta to Mumbai on 15th December 2024.
The accounts are to be closed on 31st December 2024, and the voyage is not yet completed.
Details:
- Freight earned till 31st Dec = ₹1,00,000
- Coal consumed = ₹30,000
- Stores consumed = ₹10,000
- Port charges = ₹5,000
- Crew salaries = ₹15,000
Calculation:
Total Expenses: = ₹30,000 + ₹10,000 + ₹5,000 + ₹15,000
= ₹60,000
Income: = ₹1,00,000
Profit up to 31st Dec:
= ₹1,00,000 − ₹60,000
= ₹40,000
If this voyage continues after 31st December, this ₹40,000 will be treated as Profit in Progress, and the voyage account will remain open until the voyage is completed. Voyage in progress or incomplete voyage
In Short:
- Voyage in Progress = Voyage not yet completed at balance date.
- Shown as Work in Progress (asset) or Profit in Progress (liability).
- Calculated by comparing voyage expenses and income up to the closing date.
Voyage in progress or incomplete voyage. Treatment of incomplete voyage account Note:- Important question of Financial Accounting Consignment Account Notes
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Treatment of incomplete voyage