How to Record a Crude Oil Feedstock Purchase for Refinery Processing as Inventory
Recording the purchase of crude oil as refinery feedstock, held in storage inventory until processed.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Crude Oil Feedstock Inventory | Asset (+) | 80,000,000.00 | - |
| Accounts Payable (Crude Supplier) | Liability (+) | - | 80,000,000.00 |
💡 Accountant's Note
The refinery purchases crude at market prices. Crude is held in storage as inventory until processed. FIFO or weighted average cost methods are typically used for crude inventory valuation.
Practitioner & Systems Framework
💻 ERP Architecture
Record crude feedstock inventory at cost (purchase price plus directly attributable delivery costs). Use the weighted average cost (WAC) method for blended crudes where individual lots are commingled in tanks — WAC recalculates the average cost each time a new parcel is received. For crudes held in segregated storage (separate tanks per grade), FIFO may be more appropriate. At each period-end, test inventory at the lower of cost or NRV — if crude prices have fallen, an NRV write-down may be required before the crude is processed.
⚠️ Audit Flags
The crude feedstock inventory balance is often one of the largest current assets on a refinery's balance sheet. Auditors confirm physical volumes via tank gauging and compare to the inventory record. The cost per barrel used in the WAC calculation is tested against actual invoiced prices. NRV testing requires the current refinery gate crude price (the price at which crude could be sold if not processed) — if below cost, a write-down is required.
📄 Required Documentation
Crude purchase invoice and Bill of Lading, payment terms (spot vs. term contract), tank gauge report confirming received volumes, WAC or FIFO calculation, NRV assessment at period-end (spot crude price vs. book cost), insurance certificate for crude in storage, and port/terminal storage agreement.
Automate this entry with the JEH Accounting Suite
Stop doing manual entry. Our VBA-powered ERP automatically generates your ledgers, Trial Balance, and Financial Statements.
No Subscriptions. Own your data.
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.
Related Journal Entries
Oil & Gas
How to Capitalize the Cost of a 3D Seismic Survey as an Exploration and Evaluation Asset Under IFRS 6
Oil & Gas
How to Capitalize Exploratory Drilling Costs as an E&E Asset Pending Reserve Determination
Oil & Gas