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FOB Destination - Definition, Accounting, What is FOB Destination Shipping? - YouTube
Channel: WallStreetMojo
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hello everyone hi welcome to the channel
of WallStreetmojo watch the video
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till the end also if you are new to this
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clicking the bell ican friends day we have
a topic that is FOB destination that is
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free on board as you can see there's a
there's an extract that is been taken
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the yellow highlighted one they
companies FOB destination at the port of
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Acapulco
on 30th of July 2018 so this is just an
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extract that has been taken I will get
back to this now what exactly
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is FOB destination
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what is this well FOB with estimation
stands for on destination now the free
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onboard destination is located is the
location where the ownership changes
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hands from the seller to the buyer and
does the actual sale of God actually
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occurs here so this is important for the
accounts and because it dictates the what
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we call as period or when the amounts
need to be entered into the records
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second the free on board destination
outlines the key terms
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indicating whether the seller or buyer
and got the expenses to get the goods to
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the destination on our third with Goods
add free on board destination the title
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of the the title to the girls usually
passes from the sub
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to the buyer
and this means that the goods are
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reported as inventory by the seller yeah
they are in transit since technically
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the sale does not occur until the goods
reach to the destination forth the FOB
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shipping point
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is the alternative term
for recording the sale in the records
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which indicates you know the sale is
recorded when the seller basically ships
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the goods so how will we do the
accounting for this particular thing
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how the FOB destination point is to
transfer their what we call as title of
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the goods to from the you can say buyer
to the seller as soon as goods have
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arrived to the buyers location second in
accounting only when the goods have
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arrived at the shipping destination they
should be reported as sale and increase
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in the accounts basically receivables by
the seller and a purchase by the
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inventory for the buyer third when a
sale is made the company must record the
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sale of goods and of the manufacturer
sale of goods and
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right and the Term FOB destination point
tells that you know the sale will
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officially occur when it arrives at the
buyers receive our receiving talk forth
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the buyer will record and increase
in its inventory because the inventory
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is coming in at the same time the buyer
is undertaking the reward of ownership
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and the associated risk which occurs at
the FOB destination point of the arrival
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at the shipping dock
fifth
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FOB destination shipping so the FOB destination shipping terms applies
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also to the cost of shipping and the
responsibility
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for the goods which means that the
supplier is responsible party for the
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goods and must undertake delivery fee
and the cost of any damages so there are
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mainly four variation
of FOB destination shipping items which
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are mentioned as
the first one FOB destination free
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prepaid and it is allowed
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and allowed
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so in this case the seller bears and
pays the freight charges the freight
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charges and and he is the owner of the
goods so while they are in transit so
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transfer of the title takes place only
when the goods reach at the buyers
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location
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second
the FOB destination that is fright
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prepaid and that has been added so in
this case the fright charges the freight
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charges are been paid by the
seller hero but the same is billed to
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the customer right so the seller owns
the codes in this case any and all so
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while they are in transit so transfer of
the title takes place only when the
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goods reach to the buyers location third
the fob destination freight collection
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or fright the freight that has
been collected in this case what happens
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the buyer basically he pays the freight
that is the freight cost but their docks
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the same from the final supplies in
walls so the seller still owns the goods
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while they are in transit and finally
for the free on board that is the fob
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destination right collect and that is
allowed so in this case he buy a pace
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for the freight cost but he deducts the
same from the
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final cost deduct the same from the
final cost and enter the supplies
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invoice so the seller still owns the
goods over here while they are in the
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transit now any type of fob destination
shipping terms will be superseded by if
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buyer elects to you know what we call as
override those terms
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customers arranged pickup so where the
buyer arranges to have goods picked up
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at its own risk from the sellers
location and he takes the responsibility
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for the goods from that point so in fob
destination shipping situation the
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billing staff is required to be aware of
what we call as new delivery terms so
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that you know it does not build freight
charges to the buyer now if the goods are
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what we call as damaged during the
transit
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if it is damaged during the transit the
seller basically should file an
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insurance claim
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should file an insurance claim in this
regard with the insurance carrier as the
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seller would possess the title of the
goods
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during the period and when the goods
were damaged so in most cases without
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free on board destination agreement the
shipper or the seller will probably
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record a sale as soon as the goods leave
its shipping dock irrespective of the
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terms of delivery does the real impact
of the FOB destination shipping terms
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is the determination of
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bears the risk
during the transit and who pays the
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freight expensive now I will quickly take
an example on this let's say there's a
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guy called Russian businessman he's
engaged in export of carpets and it has
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received an order let's say worth of
$5,000 from let's say Dubai-based customer
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on let's say 10th October 2013
now supply has asked the shipping to
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ship the carpets by let's say 25-10-2013 and and the
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supplier was asked to ship the carpets
by let's say by 25th October 2018 let's
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say 20 2012 sorry under the FOB
agreement so Mr. Alle shipped the flowers
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on 21st of let's say October 2012 and
the shipment cost was $400 so when
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should Alle record the scene when should
the dubai-based customer should record
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the sale and at what cost so since the
fob shipment point the delivery is made
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at the moment the carpets are shipped so
Ally should record the sale of $5000 on
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21st of October 2012
and the dubai-based customer should
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record the purchased on 21st of October
2012 - and it should record the
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inventory at 5400 not 5,000 Purchase price plus 400 as a shipment
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Cost it is because the FOB shipping
point the shipment cost is normally
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incurred bye the buyer I hope you've got
the example that's say
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particular topic Thank You everyone
joining the session so that's it for
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this particular topic if you have
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