How to Capitalize Import Duties on Construction Materials
Capitalizing customs duties paid on imported structural steel or specialist equipment into the material cost.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Material Inventory / WIP | Asset (+) | 15,000.00 | - |
| Cash in Bank | Asset (-) | - | 15,000.00 |
💡 Accountant's Note
Import duties are part of the cost to bring materials to the site. They are capitalized into the material cost, not expensed separately, following IAS 2.
Practitioner & Systems Framework
💻 ERP Architecture
Use the 'Landed Cost' module in the ERP. When the customs invoice is paid, allocate the cost directly to the specific Purchase Order receipt. The ERP recalculates the unit cost of the imported material to include the duties and freight.
⚠️ Audit Flags
Auditors test inventory valuation to ensure only allowable costs (purchase price, import duties, non-refundable taxes, transport) are capitalized. Refundable taxes (like VAT) must be excluded.
📄 Required Documentation
Customs declaration form (Bayan), freight forwarder invoice, supplier invoice, and Landed Cost allocation sheet.
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Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.