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Periodic Inventory - Freight Costs definitions

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  • Freight Costs
    Delivery expenses incurred to transport goods from seller to buyer, impacting how inventory transactions are recorded.
  • FOB Shipping Point
    Arrangement where ownership transfers to the buyer at shipment, making the buyer responsible for delivery expenses.
  • FOB Destination
    Arrangement where ownership transfers to the buyer at delivery, making the seller responsible for delivery expenses.
  • Freight In
    Inventory sub-account used to accumulate delivery expenses paid by the buyer, increasing the value of inventory.
  • Purchases
    Account reflecting the total cost of goods acquired for resale, excluding delivery expenses unless capitalized.
  • Accounts Payable
    Liability account representing amounts owed to suppliers for inventory and related delivery expenses.
  • Periodic System
    Inventory tracking method where purchases and delivery expenses are recorded in temporary accounts until period end.
  • Capitalization
    Process of recording a cost as an asset on the balance sheet rather than as an expense on the income statement.
  • Selling Expense
    Cost incurred by the seller to deliver goods to the buyer, recorded when the seller pays for delivery.
  • Asset
    Resource with economic value, such as inventory, increased by purchases and capitalized delivery expenses.
  • Balance Sheet
    Financial statement showing a company's assets, liabilities, and equity at a specific point in time.
  • Inventory
    Goods held for resale, whose value may include both purchase price and capitalized delivery expenses.
  • Delivery Expense
    Cost associated with transporting goods, treated as either an inventory cost or a selling expense depending on terms.
  • Ownership Transfer
    Point in the shipping process when legal title to goods shifts from seller to buyer, determining responsibility for delivery costs.
  • Supplier
    Entity providing goods to a buyer, often extending credit recorded as accounts payable.