Demurrage fee

 Shipping Demurrage Fee.

Demurrage is a fee charged for the use of a particular asset or service beyond the agreed-upon time. In particular, demurrage is commonly associated with shipping, where it refers to the fee charged for the detention of a vessel beyond the time allowed for loading or unloading. 

The purpose of demurrage is to encourage timely use of assets or services and to compensate the owner for any lost time or opportunity costs.

Specimen of demurrage letter 

Accounting treatment of demurrage 

The accounting treatment of demurrage depends on the nature of the business transaction and the applicable accounting standards. 

In general, demurrage charges are treated as an expense and are recorded in the income statement of the entity that incurs them. If the demurrage is related to the purchase or sale of goods, it may be included as part of the cost of goods sold or inventory valuation. 

If the demurrage is related to the use of an asset, such as a ship or a piece of equipment, it may be capitalized and amortized over the useful life of the asset. The specific accounting treatment of demurrage will depend on the circumstances of each transaction and the applicable accounting standards.