Written by the Fiveable Content Team • Last updated August 2025
Written by the Fiveable Content Team • Last updated August 2025
Definition
Freight-in refers to the shipping costs incurred by a buyer to transport goods from the supplier to the buyer's location. It is considered part of the cost of purchasing inventory and is added to the cost of goods purchased.
Freight-in costs are recorded as part of inventory costs on the balance sheet until the goods are sold.
There are two commonly used methods for recording freight-in costs: adding them directly to inventory or treating them as a separate expense.
Under the perpetual inventory system, freight-in is added directly to the Inventory account.
Under the periodic inventory system, freight-in is debited to a separate Freight-In or Transportation-In account and later included in Cost of Goods Sold.
Accurately accounting for freight-in ensures that the cost of goods sold reflects all expenses related to acquiring inventory.