The buyer and seller of merchandise must agree on who is responsible for paying freight terms.
- Terms FOB shipping point means the buyer accepts ownership when the goods depart the seller's place of business.
- When the shipping costs are the responsibility of the buyer, then the Merchandise Inventory account is debited for the freight charges.
- Revenue for the sale will be recorded after the goods reach their destination, if the goods are shipped FOB destination.
- Terms FOB destination means that the seller is responsible for shipping costs.
