Goods in Transit

Goods in transit can be defined as the merchandise and the goods or the inventory that have been dispatched from the shipping dock of the seller but yet not received at the shipping dock of the buyer. Both the seller and receiver must record the goods in transit in their accounting records. There are certain shipping rules associated with transit of goods that can be:-

FOB Shipping Point

If the shipment of the goods is designated on the biases of FOB shipping point that means the ownership of the goods is transferred to the buyer as soon as the goods are boarded on the ship

FOB Destination

If the shipment of the goods is designated on the biases of FOB destination that means that the ownership of the goods is transferred to the buyers as soon as the goods reach at the buyer destination.

Practically the buyers don’t undergo any recording procedures until and unless goods are received at the buyers shipping dock. This behavior may cause a problem in FOB shipping scenario as the seller and the shipping entity record a transaction as soon as the goods leave the seller shipment dock however the receiving company does not record a transaction until or unless the shipment reaches its own shipment dock. This means that there is no transaction record or receipt while the goods are in transit.

However this delay of recording the transaction while the goods are in transit may not cause any problem as long as the receiving company refrains from recording accounts payable till the date on which they are going to make entries in the inventory.

Other Related Accounting Articles:

• Inventory with High Turnover
• Net Realizable Value
• Comparing LIFO and FIFO methods of Inventory
• Just In Time Inventory
• Materials Ledger Card–Perpetual Inventory
• Retail Inventory Method
• The Gross Profit Method of Inventory Accounting
• Inventory Accuracy
• Dollar Value LIFO Method
• Obsolete Inventory Percentage