Carriage inward and carriage outward, sometimes referred to as freight inwards and freight outwards, are transportation costs incurred by a business. Freight inwards relates to costs incurred in having goods delivered to the business from suppliers, whereas freight outwards refers to the costs of delivering goods to customers.
A business sells goods to a buyer with the terms FOB shipping point freight prepaid. The value of the goods is £5,000 and the settlement terms are 2/10, n/30. The freight cost from the shipping point to the buyers destination is £700. The seller prepays the freight expense. Calculate the following . . .
FOB accounting deals with the treatment of freight charges and how they are recorded in the accounting system.
FOB means Free on Board and is an abbreviated term used in shipping. It is important to understand the nature of the term accounting FOB, as it will affect how the freight charges are posted to the accounting records.
Having decided that the terms of the contract are FOB, it is now necessary to choose the point at which responsibility passes from the seller to the buyer. The FOB point can either be the buyers destination, or the place from which the goods are shipped – the shipping point.