Discuss the accounting treatment of voyage accounts.

(a) Complete voyage

(b) Incomplete voyage

Meaning of Voyage Account

A Voyage Account is a special nominal account prepared by shipping companies to determine the profit or loss of a specific voyage. It records all income earned (such as freight, passage money, primage) and all expenses incurred (such as fuel, wages, port charges, insurance) during a voyage of a ship.

It helps in knowing whether a particular voyage was profitable or not, since each voyage is treated as a separate cost–revenue unit. treatment of voyage accounts.

(a) Accounting Treatment of a Complete Voyage

When the voyage is fully completed within the same accounting period, the entire expenses and income related to the voyage are taken to the Voyage Account.

Treatment:

1. All direct voyage expenses are debited to Voyage Account
   Examples:
   
   • Coal & fuel
   • Wages & salaries of crew
   • Stores consumed
   • Port charges
   • Repairs
   • Insurance (ship & freight)
   • Depreciation of ship (proportionate) treatment of voyage accounts.
2. All voyage incomes are credited to Voyage Account
   Examples:
   
   • Freight received
   • Passage money
   • Primage
   • Address commission (credited but then charged as expense)
3. Closing of Voyage Account
   
   • If incomes > expenses, the balance represents Voyage Profit → transferred to Profit & Loss Account.
   • If expenses > incomes, the balance represents Voyage Loss → transferred to Profit & Loss Account. treatment of voyage accounts.
4. No carry forward is required
   Since the voyage ends in the same accounting year, all items are fully recorded and closed. treatment of voyage accounts.
   

(b) Accounting Treatment of an Incomplete Voyage

When the voyage is not completed by the end of the accounting year, part of the voyage expenses and income relates to the next year. Hence, the concept of Voyage-in-Progress is used.

Treatment:

1. Record all voyage expenses and incomes incurred up to the date of closing.
   
2. Transfer the unexpired portion of expenses to “Voyage-in-Progress Account” treatment of voyage accounts.
   These are expenses related to the part of the voyage not yet completed.
   Examples:
   
   • Prepaid insurance
   • Stores remaining unused
   • Proportionate expenses relating to the next year
   • Advance payments made for next part of journey
3. Freight earned only for the completed portion is credited
   If the return voyage is incomplete, only that part of freight which has been earned till date is taken to the Voyage Account. treatment of voyage accounts.
   
4. Closing of Voyage Account
   The resulting balance of the Voyage Account represents the profit or loss for the completed portion of the voyage.
   
5. Voyage-in-Progress shown as Asset
   The Voyage-in-Progress Account balance is shown as an asset in the Balance Sheet until the voyage is completed. treatment of voyage accounts.
6. Next year treatment
   When the voyage completes next year:
   
   • Bring forward Voyage-in-Progress (asset)
   • Add new expenses
   • Record remaining income
   • Finally, compute total profit or loss for the entire voyage.

Summary

Complete Voyage:

• All expenses and incomes recorded.
• Voyage Account closed.
• Profit/loss transferred to P&L.
• No carry forward.

Incomplete Voyage:

• Only the completed portion is accounted for.
• Unexpired expenses → Voyage-in-Progress (Asset).
• Uncompleted income not recorded.
• Balance profit/loss relates to completed part only. treatment of voyage accounts.

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