Freight out or Delivery Expenses or Transportation-out Freight-in or Delivery-in or Transportation-in

On January 10, Dixie Trading located in Los Banos sold merchandise worth
P100,000 from Pearl Enterprise located in Batangas with terms 2/10,n/30.
Freight or transportation cost amounted to P10,000 was paid on January
14 based on below assumptions. On January 20 Pearl Enterprise paid in
full.
On January 10, Pearl Enterprise located in Batangas purchased
merchandise worth P100,000 from Dixie Trading located in Los Banos
with terms 2/10,n/30. Freight or transportation cost amounted to
P10,000 was paid on January 14 based on below assumptions. On
January 20 Pearl Enterprise paid in full.

Assume the following shipping terms: Assume the following shipping terms:

a. FOB shipping point, freight collect a. FOB shipping point, freight collect

Jan 10 Accounts Receivable 100,000 Jan 10 Purchases 100,000

Sales 100,000 Accounts Payable 100,000

Jan 14 Freight-in 10,000

Jan 14 No Entry Cash 10,000

Jan 20 Accounts Payable 100,000

Jan 20 Cash 98,000 Cash 98,000

Purchase Discounts 2,000
Sales Discounts 2,000

Accounts Receivable 100,000

b.
 B. FOB shipping point, freight prepaid b. FOB shipping point, freight prepaid

Jan 10 Accounts Receivable 100,000 Jan 10 Purchases 100,000

Sales 100,000 Accounts Payable 100,000

Jan 14 Accounts Receivable 10,000 Jan 14 Freight-in 10,000

Cash 10,000 Accounts Payable 10,000

Jan 20 Cash 108,000 Jan 20 Accounts Payable 110,000

Sales Discounts 2,000 Cash 108,000

Purchase Discounts 2,000
Accounts Receivable 110,000

c. FOB Destination, freight prepaid

C. FOB Destination, freight prepaid

Jan 10 Purchases 100,000

Jan 10 Accounts Receivable 100,000
Accounts Payable 100,000
Sales 100,000

Jan 14 No entry
Jan 14 Freight-out 10,000

Cash 10,000
Jan 20 Cash 98,000 Jan 20 Accounts Payable 100,000

Sales Discounts 2,000 Cash 98,000

Purchase Discounts 2,000
Accounts Receivable 100,000

d. FOB Destination, freight collect

D. FOB Destination, freight collect

Jan 10 Purchases 100,000

Jan 10 Accounts Receivable 100,000
Accounts Payable 100,000
Sales 100,000

Jan 14 Accounts Payable 10,000

Jan 14 Freight-out 10,000
Cash 10,000
Accounts Receivable 10,000

Jan 20 Accounts Payable 90,000

Jan 20 Cash 88,000
Cash 88,000
Sales Discounts 2,000 Purchase Discounts 2,000
Accounts Receivable 90,000

*Freight-in account is used to record freight cost incurred by the buyer in

*Freight-out account is used to record shipping cost shouldered by the acquiring merchandise. It is shown in the Cost of Goods Sold section of
seller for sales of merchandise to customers. Another term is Delivery the Income Statement. It’s added to purchases. It is called adjunct
Expense or Transportation-out which is shown on the Selling Expense account.
section of the Income Statement.