ACCOUNTING FOR FREIGHT

**The owner of the goods pay the freight

1. F.O.B SHIPPING POINT (Free on Board Shipping Point)
-implies that ownership of a good or merchandise is transferred to the buyer
upon shipment
2. F.O.B DESTINATION POINT (Free on Board Destination Point)
-implies that ownership of a good or merchandise is transferred to the buyer
upon reaching the point of destination

Sellers Place (Shipping Point) Buyers Place (Destination

Point)

1. Freight Prepaid
-means that the transportation cost shall be paid by the seller to the common
carrier
2. Freight Collect
-means that the transportation cost shall be paid by the buyer to the common
carrier

Pro-Forma Entries

Buyer Seller
Purchases
XXX
Accounts Payable Accounts Receivable
Case A:
XXX XXX
FOB Shipping Point,
Freight-In Sales
Collect
XXX XXX
Cash
XXX
Accounts Receivable
Purchases
XXX
XXX
Sales
Case B: Accounts Payable
XXX
FOB Shipping Point, XXX
Accounts Receivable
Prepaid Freight-In
XXX
XXX
Cash
Accounts Payable
XXX
XXX
Case C: Purchases Accounts Receivable
FOB Destination Point, XXX XXX
Collect Accounts Payable Sales
XXX XXX
Freight-Out
 XXX
Accounts Receivable
XXX
Accounts Receivable
XXX
Purchases Sales
Case D: XXX XXX
FOB Destination Point, Accounts Payable Freight-Out
Prepaid XXX XXX
Cash
XXX