Accounting › Section E · Merchandising transactions › Topic E.5
Shipping terms and freight-in
When a truckload of goods is on the road, someone owns it and someone pays the carrier. Shipping terms settle both questions, and they decide whether the freight bill becomes part of the cost of inventory or an expense of selling.
In this topic
- Who owns the goods on the truck?
- FOB shipping point
- FOB destination
- Freight-in: part of the cost of inventory
- Freight-out: a selling expense
- Worked example: the buyer pays
- Worked example: the seller pays
- Worked example: goods on the road at year end
- Fine print
- Common mistakes to avoid
- Key takeaways
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