FOB destination

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

Related terms

FOB Shipping Point:

Ownership transfers to the buyer when goods leave the seller’s premises, making the buyer responsible for shipping costs and risks.

Consignment Inventory: Goods are sent by a consignor to a consignee, but ownership remains with the consignor until sold.

Inventory Valuation Methods:

Accounting methods such as FIFO, LIFO, and weighted average used to determine inventory cost and profitability.