Written by the Fiveable Content Team • Last updated August 2025
Written by the Fiveable Content Team • Last updated August 2025
Definition
Ownership of inventory determines which party, buyer or seller, holds legal title to goods during transit. It impacts the recording of inventory and related costs in financial statements.
FOB Shipping Point means the buyer takes ownership when goods are shipped.
FOB Destination means the seller retains ownership until goods reach the buyer.
Ownership affects who records the freight-in costs as part of inventory.
Understanding ownership is crucial for accurate financial reporting and compliance.
Disputes over ownership can lead to misstatements in financial documents.
Related terms
FOBShippingPoint: A shipping term indicating that the buyer takes ownership once goods are shipped.
FOBDestination: A shipping term indicating that the seller retains ownership until goods reach their destination.
FreightIn: The cost incurred by a company to transport its purchased goods from supplier to its location, added to inventory cost under certain conditions.