Financial Accounting I

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FOB destination

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Financial Accounting I

Definition

FOB destination is a shipping term where the seller retains ownership and responsibility for goods until they reach the buyer's location. The seller incurs shipping costs and risks during transit.

5 Must Know Facts For Your Next Test

  1. Ownership of inventory transfers to the buyer only upon delivery.
  2. The seller is responsible for shipping costs and any damages incurred in transit.
  3. Revenue is recognized by the seller when goods are delivered to the buyer.
  4. FOB destination impacts inventory accounting, as goods in transit are recorded on the seller's books until delivery.
  5. This term contrasts with FOB shipping point, where ownership transfers when goods leave the seller's premises.

Review Questions

  • When does ownership transfer under FOB destination terms?
  • Who bears the cost of shipping in FOB destination?
  • How does FOB destination affect revenue recognition for the seller?
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