Paid freight Rs. 120
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Assuming you are paying by check (cash) at the time you order the goods…
Credit; cash (the checking account you used to make the purchase)
Debit; freight (this account being an expense account on the income statement section of your chart of accounts “COA”).
Depending on how you organise your COA you may group your Freight expense as a cost of goods sold, perhaps creating an “Inbound Freight” expense account and an “Outbound Freight”, that way you can differentiate between inbound and outbound costs when you are looking at your results. This assumes your inbound purchase are in bulk, whereas your outbound sales are delivered piecemeal…and different per unit shipping costs would apply.
If you are recording a transaction created by invoice from your vendor, then same general approach, except record the accrual transaction first…
Debit; inventory (when you have received the goods) and also Debit freight as a separate line item (your COGS inbound freight account)
Credit; accounts payable (and breakout the cost of the goods and the inbound freight cost to arrive at the invoice total, assigning each of the line items its respective account)
Then when you make the payment of the invoice…
Credit; cash
Debit; accounts payable
Your system should then properly record the cost of the goods on the balance sheet until they are sold to a customer, and the inbound freight charges as an COGS expense on the income statement.
Credit; cash (the checking account you used to make the purchase)
Debit; freight (this account being an expense account on the income statement section of your chart of accounts “COA”).
Depending on how you organise your COA you may group your Freight expense as a cost of goods sold, perhaps creating an “Inbound Freight” expense account and an “Outbound Freight”, that way you can differentiate between inbound and outbound costs when you are looking at your results. This assumes your inbound purchase are in bulk, whereas your outbound sales are delivered piecemeal…and different per unit shipping costs would apply.
If you are recording a transaction created by invoice from your vendor, then same general approach, except record the accrual transaction first…
Debit; inventory (when you have received the goods) and also Debit freight as a separate line item (your COGS inbound freight account)
Credit; accounts payable (and breakout the cost of the goods and the inbound freight cost to arrive at the invoice total, assigning each of the line items its respective account)
Then when you make the payment of the invoice…
Credit; cash
Debit; accounts payable
Your system should then properly record the cost of the goods on the balance sheet until they are sold to a customer, and the inbound freight charges as an COGS expense on the income statement.
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