Business Central Item Charges: Add Freight and Import Duty to Inventory Cost (Landed Cost)

The forwarder's sea freight bill arrives three weeks after the goods. So it gets posted straight to Freight Expense.

Now the items in your warehouse look cheaper than they really are, and every sale of them shows a bigger margin than you actually made. Business Central can add that freight to the cost of the goods you already received, using an Item Charge. No change to the receipt, no journal.

Quick answer

• One time only: create the item charge in Item Charges (for example P-FREIGHT).
• Create a purchase invoice for the forwarder. Add a line with Type = Charge (Item) and the freight amount.
• On that line, open Item Charge Assignment → Get Receipt Lines and pick the posted receipts the freight belongs to.
• Choose Suggest Item Charge Assignment → By Amount → OK, then post the invoice.
• BC adds the freight to the cost of those received items. No journal needed.

Before and after

Before: freight as an expense ▼ Freight bill arrives weeks after the goods ▼ Post to Freight Expense a G/L account line on the invoice ▼ Item cost too low (margin looks better than it is)

After: Item Charge ▼ Freight bill arrives weeks after the goods ▼ Charge (Item) line assigned to the posted receipts ▼ Freight in the item cost ✓ Real margin

Before you start: set up the item charge (one time only)

1. Search Item Charges → New.
2. Enter a No. and Description, for example P-FREIGHT, Misc. Freight Charge (Purch.).
3. Choose the Gen. Prod. Posting Group (SERVICES here) and the VAT Prod. Posting Group (STANDARD here). The VAT Prod. Posting Group decides the tax on the freight line.

Create one item charge for each cost you want to see separately, for example sea freight, air freight, import duty and insurance. Your list may already have a few, like P-ALLOWANCE and P-RESTOCK in this example.

4. Check which G/L account the freight will post to. Search General Posting Setup and find the line with your forwarder's Gen. Bus. Posting Group (DOMESTIC) and the item charge's Gen. Prod. Posting Group (SERVICES). The Purch. Account on that line is where the freight invoice posts: 7110 here.

Good to know

• No line for that combination? Posting stops with an error about General Posting Setup. Add the line, or ask whoever looks after your posting groups.
• Purch. Account is only half the story. BC also moves the freight into the item's Inventory account. The G/L preview in Step 5 shows how.

Step 1: Create the purchase invoice for the freight

1. Search Purchase Invoices → New. Choose the forwarder as the vendor (Wide World Importers in this example) and enter the Vendor Invoice No.
2. Add a line: Type = Charge (Item), No. = P-FREIGHT, Quantity = 1 and Direct Unit Cost = the freight amount (1,000.00 here).

There are no item lines on this invoice. The goods were received on their own purchase order. This invoice is only for the freight.

Step 2: Open Item Charge Assignment

1. Select the charge line, then choose Line → Related Information → Item Charge Assignment.

2. The page opens empty. At the bottom, Rem. to Assign shows 1,000.00 in red: nothing is assigned yet.
3. Choose Get Receipt Lines.

Step 3: Pick the receipts this freight covers

1. Select every posted receipt line the freight bill covers, then choose OK. The forwarder's invoice or bill of lading usually tells you which shipments.
   

In this example, the container held desks from two suppliers: receipts 107006 and 107007 (vendor 10000, 1 desk each) and 107011 and 107012 (vendor 50000, 18 desks each).

Step 4: Split the freight

1. The four receipt lines are now on the page, with nothing assigned yet. Choose Suggest Item Charge Assignment.

2. Choose how to split it, then OK.
   

Method	Splits the charge by	Good for
Equally	The same share for every line	Lines of similar size and value
By Amount	The value of each line	Most freight, and import duty or insurance, which are usually charged on value (Mostly used method)
By Weight	The weight of each line	Freight billed by kg, such as air freight
By Volume	The volume of each line	Freight billed by cubic metre

By Weight and By Volume use the weight and volume on the item card (the Gross Weight and Unit Volume columns on this page). If those are blank, the split won't work.

Step 5: Check the split and post

1. BC fills in Amount to Assign for each receipt. At the bottom, Rem. to Assign is now 0.

Here is how the 1,000.00 was split, and what Equally would have done instead:

Receipt	Supplier	Desks	By Amount	Equally
107006	10000	1	26.32	250.00
107007	10000	1	26.32	250.00
107011	50000	18	473.68	250.00
107012	50000	18	473.68	250.00
Total		38	1,000.00	1,000.00

All 38 desks have the same unit cost, so By Amount gives every desk the same 26.32 of freight. With Equally, the receipt with 1 desk would carry 250.00 of freight, the same as the receipt with 18.

Why is Qty. to Assign 0.02632?

The charge line has Quantity = 1, so BC splits that 1 into fractions (1/38 and 18/38 here). Ignore Qty. to Assign and look at Amount to Assign. Qty. to Handle fills in by itself.

2. Close the page. Before you post, choose Preview Posting and open the G/L Entry line to see exactly what will hit the G/L.

What each line does (your account numbers will be different):

Account	Debit	Credit	Why
7110	1,000.00		The freight line. Purch. Account for DOMESTIC + SERVICES in General Posting Setup.
5630	250.00		Tax on the freight, from the VAT Prod. Posting Group.
5410		1,250.00	What you owe the forwarder.
2110	1,000.00		Inventory: 26.32 + 26.32 + 473.68 + 473.68, one line per receipt.
7170		1,000.00	Direct Cost Applied: takes the freight back out of the P&L.
Total	2,250.00	2,250.00

The net result: 7110 and 7170 cancel each other out, so the P&L isn't touched. The 1,000.00 freight sits in inventory until the desks are sold.

Only see the invoice lines, no inventory lines? Automatic Cost Posting is off in Inventory Setup. The inventory lines come later, when you run Post Inventory Cost to G/L.

3. Choose Post.

Step 6: Check it

Open the item's Item Ledger Entries, select one of the receipts and choose Value Entries. There's a new line with Item Charge No. = P-FREIGHT, and the receipt's Cost Amount (Actual) now includes the freight. For a list of all charges, run the Item Charges - Specification report.

✓ Done. The freight is now part of the desks' cost, and their margin shows what you really made.

Freight on the supplier's own invoice?

Some suppliers add delivery to the same invoice as the goods. Then add the Charge (Item) line on that purchase order or invoice, next to the item lines. When you open Item Charge Assignment, BC already lists the item lines from the same document, so there's nothing to get. Choose Suggest Item Charge Assignment and post as usual.

FAQ

"You must assign item charge P-FREIGHT if you want to invoice it."

The charge isn't fully assigned yet. Open Item Charge Assignment on the line and make sure Rem. to Assign at the bottom is 0, then post again.

Some of the goods were already sold before the freight bill came in.

That's fine. The freight first goes to the receipt. When Adjust Cost – Item Entries runs, BC moves the share that belongs to the goods already sold into cost of goods sold. Until it runs, those sales don't include the freight.

The goods were received last month, and that month is closed. Can I still assign the freight?

Yes. The invoice posts on its own posting date, in the current month. BC links the cost back to the original receipt.

The freight shows on account 7110. Shouldn't it be in inventory?

It is. The invoice debits the Purch. Account (7110 here), and BC credits the Direct Cost Applied account (7170 here) by the same amount, so the two cancel out. The freight lands in the item's Inventory account (2110 here). See the G/L preview in Step 5. If Automatic Cost Posting is off, the inventory side only posts when you run Post Inventory Cost to G/L.

Can I use this for import duty, insurance or handling charges too?

Yes. Create a separate item charge for each (for example P-DUTY), so you can report them separately. The steps are the same.

One freight bill covers shipments from several suppliers. Do I need several invoices?

No. Get Receipt Lines lets you pick lines from several receipts and suppliers in one go, as in this example.

Our items use Standard costing. Why didn't the unit cost change?

With Standard costing, item charges don't change the unit cost. BC posts the freight as a purchase variance instead.

Stuck somewhere? Drop a comment below — happy to help.