The accounting of logistics costs and a case study

Based on the military lexicon, the initial use of the word logistics could be dated to back to 1905 when it was used in connection with the word "army". Following the Second World War, logistics came to be used in civilian life as well and made its way to business literature from the 1963 onward. Logistics refers to the process of effectively planning, implementing and coordinating the movement of resources and raw materials from the point of production to the point of consumption in order to meet individuals' needs. The basic purposes of logistics activities are to increase the quality of customer services, and to achieve competitive advantage through an effective use of resources and investments. Logistics activities require that a plethora of functions consisting of transportation, storage, handling, packaging, value-added operations, inspection and supervisory services, and customs clearance are effectively processed in order to maximize customer satisfaction and sales/profits. The logistics costs are the costs that are incurred in undertaking activities from the initial production to final consumption. The share of logistics costs in total costs is becoming increasingly greater, rendering it all the more significant for businesses to make right logistics decisions. The major cost components that logistics activities produce are customer services costs, inventory costs, transportation costs, storage costs at warehouses, costs of production planning, order processing and information systems costs, per unit costs, insurance costs and customs clearance costs. According to Turkish Uniform Accounting System, cost accounting accounts are listed in Group-7 of the chart of accounts. Logistics costs are recorded under the 74-Costs of Services Production account of the Group 7/A of the uniform chart of accounts. The logistics costs components are recorded in Group 8 of the chart of accounts corresponding to Management Accounting accounts. The accounting of logistics costs are based on the premises put forward by the following Turkish Accounting Standards: TAS 2 Inventories, TAS 16 Property, Plant and Equipment, TAS 23 Borrowing Costs, TAS 39 Financial Instruments: Recognition and Measurement, TAS 21 The Effects of Changes in Foreign Exchange Rates, and TAS 17 Leases.