Freight in definition
/What is Freight In?
Freight in is the transportation cost associated with the delivery of goods from a supplier to the receiving entity. This expense is typically incurred by the buyer and is directly associated with acquiring inventory or raw materials. Accurate accounting for freight in ensures proper inventory valuation and gross profit calculation.
Accounting for Freight In
For accounting purposes, the recipient adds the cost of freight in to the cost of the received goods. This means adding freight in to the cost of received inventory, and to the cost of received fixed assets. This means that freight in will initially be recorded as an asset, along with the inventory or fixed assets with which it is associated. When the related inventory is sold, the freight in cost is charged to the cost of goods sold. The cost of the freight in associated with a fixed asset is charged to expense as part of the ongoing monthly depreciation charge for that asset.
Related AccountingTools Course
FAQs
Is Freight In a Direct or Indirect Cost?
Freight in is considered a direct cost because it is directly tied to acquiring inventory and making goods available for sale. Unlike indirect costs, which support overall operations, freight in can be traced specifically to the purchase of merchandise. This is why it is capitalized into inventory and later included in cost of goods sold.