Perpetual Inventory - Freight Costs definitions Flashcards
Perpetual Inventory - Freight Costs definitions
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Freight Costs Delivery expenses incurred to transport goods, which may be paid by either the buyer or seller depending on delivery terms. FOB Shipping Point Transfer of goods' ownership occurs at the seller's location, making the buyer responsible for shipping costs and risks during transit. FOB Destination Transfer of goods' ownership occurs at the buyer's location, making the seller responsible for shipping costs and risks until delivery. Inventory Account Asset account reflecting the value of goods held for sale, including purchase and, in some cases, delivery costs. Capitalization Process of recording a cost as part of an asset's value rather than as an immediate expense. Selling Expense Cost associated with delivering goods to customers, recorded when the seller pays for shipping under certain terms. Accounts Payable Liability account representing amounts owed to suppliers or service providers, such as for inventory or delivery fees. Ownership Transfer Point at which legal title and responsibility for goods shift from seller to buyer, determined by shipping terms. Asset Resource with economic value, such as inventory, expected to provide future benefit to a business. Liability Obligation to pay debts or provide services, such as amounts owed for inventory or delivery services. Journal Entry Formal accounting record documenting the financial impact of transactions, including inventory purchases and freight costs. Delivery Expense Cost incurred to transport goods to a buyer, which may be treated as a selling expense or added to inventory. Balance Sheet Financial statement showing a company's assets, liabilities, and equity at a specific point in time. UPS Example of a third-party shipping company used to illustrate freight cost transactions in accounting scenarios. Cash Asset account representing currency or funds available for immediate use, often used to settle accounts payable.
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