How to Record the Cost of Outsourced Freight to a Sub-Contracted Carrier
Expensing the payment to a third-party carrier hired to fulfill a customer shipment under an asset-light logistics model.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Purchased Transportation Expense | Expense (+) | 1,800.00 | - |
| Accounts Payable: Carrier | Liability (+) | - | 1,800.00 |
💡 Accountant's Note
In 'Asset-Light' logistics, the company bills the client $2,500 and pays a sub-contractor $1,800, capturing a margin on the coordination.
Practitioner & Systems Framework
💻 ERP Architecture
Asset-light logistics (freight brokerage, 3PL without owned trucks) relies on sub-contracted carriers for delivery. The gross margin = Client freight revenue (JOD 2,500) minus Purchased Transportation (JOD 1,800) = JOD 700. Track purchased transportation by carrier, by lane, and by shipment to analyze sub-contractor margin per route. Under IFRS 15 principal vs. agent analysis: if the logistics company controls the transportation service before providing it to the client (principal), recognize gross — which is the typical treatment since the logistics company selects the carrier and is responsible if the carrier fails. Match the carrier invoice to the corresponding client shipment for job-level profitability reporting.
⚠️ Audit Flags
Auditors test the IFRS 15 principal vs. agent classification. A company that merely arranges transport (agent) should recognize only the net commission (see logistics-freight-forwarding-commission); a company that controls the service (principal) recognizes gross. Key principal indicators: the logistics company is responsible to the client if the carrier fails, it has discretion in selecting the carrier, and it takes the credit risk on the client. Carrier invoices must be received and approved before payment — fake carrier invoices are a fraud risk.
📄 Required Documentation
Client freight booking confirmation and invoice, carrier booking confirmation and invoice, carrier selection authorization, delivery confirmation (linking carrier delivery to client order), job-level P&L (client revenue minus carrier cost minus direct costs), IFRS 15 principal vs. agent assessment, and carrier invoice approval records.
Automate this entry with the JEH Accounting Suite
Stop doing manual entry. Our VBA-powered ERP automatically generates your ledgers, Trial Balance, and Financial Statements.
No Subscriptions. Own your data.
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.