How to Record Inventory In-Transit (FOB Shipping Point)
Accounting for goods that have left the overseas factory but have not yet arrived at the brand's distribution center.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Inventory - Finished Goods In-Transit | Asset (+) | 100,000.00 | - |
| Accounts Payable - Factory / Supplier | Liability (+) | - | 100,000.00 |
💡 Accountant's Note
Most international apparel contracts are 'FOB Shipping Point' (Free On Board). This means legal title and the risk of loss pass to the brand the moment the goods are loaded onto the ship or plane in the country of origin. Even though the boxes aren't in the brand's warehouse, they must be recorded as an asset. This is a common point of error where brands only record inventory when it 'arrives,' leading to understated assets and liabilities.
Practitioner & Systems Framework
💻 ERP Architecture
Use a 'Virtual Warehouse' in the ERP called 'In-Transit.' When the physical goods arrive and are scanned in, a 'Transfer' entry moves the value from 'In-Transit' to 'Available for Sale.'
⚠️ Audit Flags
Verification of 'Title.' Auditors will review the Bill of Lading (BOL) dates against the G/L entry date. If the BOL is dated Dec 28th, the goods must be on the Dec 31st balance sheet.
📄 Required Documentation
Bill of Lading, Commercial Invoice, and Marine Insurance certificate.
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Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.
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