Freight Costs: Freight-In vs Freight Out

When thepurchaserdirectly incurs the freight costs, the account Freight-inis debited. Freight-In is often referred to asTransportation-In. Freight-In is a normal debit balance account. Freight-In is part of cost ofgoods purchased. Freight costs are not subject to a purchase discount. Purchase discounts apply only on the invoice cost of the merchandise.

In contrast, freight costs incurred by theselleron outgoing merchandise are anoperating expenseto the seller. These costs increase anexpense accounttitledFreight-Out, orDelivery Expense, which can also be referred to asTransportation-Out.When the seller, agrees to pay the transportation charges on goods they have sold, this expense is a cost ofsellingmerchandise, not a cost ofpurchasing merchandise

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