ACTBAS2:

Introductory AccountingPart 2 Accounting for Freight Transactions Terms to Remember 1. Free on Board 2. Shipping Point (Sellers Place) 3. Destination Point (Buyers Place) 4. Collect 5. Prepaid F.O.B. Shipping Point 1. The FreightIn account is debited by the byer. (Responsibility of the goods is vested upon the buyer) 2. The Buyer should pay the forwarder, but the seller may pay the forwarder in behalf of the buyer. In this case, the buyer has additional liability to the seller. 3. The moment the goods are loaded on the ship, the buyer is responsible for the goods. Title to the goods is transferred to the buyer at shipping point. 4. In the case of insurance, the buyer should be the one applying for insurance. F.O.B. Destination Point 1. The FreightOut account is recorded by the seller. 2. It is the seller who should pay the forwarder, but the buyer may pay the forwarder on behalf of the seller. 3. Title to the goods is transferred to the buyer at destination point. Collect The Buyer pays the forwarder. This also means that the Buyer credits the cash account for the freight transaction. Prepaid The seller pays the forwarder. This also means that the seller credits the cash account for the freight transaction. Journal Entries Buyers Books F.O.B. Shipping Point, Collect FreightIn Cash no entry Sellers Books

F.O.B. Shipping Point, Prepaid FreightIn Accounts Payable Accounts Receivable Cash

accountingforfreighttransactions

ACTBAS2: Introductory AccountingPart 2 Accounting for Freight Transactions F.O.B. Destination Point, Collect Accounts Payable Cash FreightOut Accounts Receivable

F.O.B. Destination Point, Prepaid no entry FreightOut Cash

accountingforfreighttransactions