Reference no: EM132241649

Question - Freight Costs: Freight-In vs Freight Out

When the purchaser directly incurs the freight costs, the account Freight-in is debited. Freight-In is often referred to as Transportation-In. Freight-In is a normal debit balance account. Freight-In is part of cost of goods 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 the seller on outgoing merchandise are an operating expense to the seller. These costs increase an expense account titled Freight-Out, or Delivery Expense, which can also be referred to as Transportation-Out. When the seller, agrees to pay the transportation charges on goods they have sold, this expense is a cost of selling merchandise, not a cost of purchasing merchandise

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