Inventory accounting goods in transit: at the end of the reporting period?
Accounting for goods in transit at end of reporting period will depend upon the terms of trade. Where goods are purchased on an FOB shipping basis the goods belong to the purchaser from the time they are shipped, and should be included in inventory/accounts payable at reporting date.
If goods are purchased on FOB destination terms no adjustment will be required as the goods still legally belong to the supplier.
If goods are sold on FOB destination terms then they belong to the enterprise until they arrive at the customer’s premises. If the sale has been recorded in the current year it will need to be unrecognized.
