Welcome, Guest

Want to take part in these discussions? If you have an account, sign in now.

If you don't have an account, apply for one now.

1. • CommentAuthormrmarket1234
   • CommentTimeMar 7th 2007

    
   I'm drawing a blank here on accounting for shipping costs when doing the journal entries for a transaction. Could somone please walk me through the various journal entries for the following example? Thanks!
   
   Example: ABC Corp sells $10,000 of merchandise to a customer and charges $50 to ship the goods, for a total invoice of $10,050 (we'll ignore taxes for now). The goods cost $6,000.
   
   I know that in general you would enter the following:
   
   Accounts Receivable 10,000
   Sales 10,000
   
   Cost of Goods Sold 6,000
   Inventory 6,000
   
   But I'm not sure how to deal with the shipping costs. Since the cost is passed through to the customer, do you add it to revenues? And how do you reflect it in a journal entry (Shipping Expense and some other account?)
   
   Thanks!!

   Thankful People: harum
2. • CommentAuthorCounter
   • CommentTimeMar 8th 2007

    
   If the company does its own deliveries, I would record the $50 as part of the Sales. Its expense of delivering the items is an operating expense such as Delivery Expense or Shipping Expense or it is broken down into Truck Depreciation Expense, Truck Operating and Maintenance Expenses. Wages - Delivery.
   
   If the company has its items delivered by a trucking company or uses UPS, then I would still record the $50 billed as Sales revenue. The charges incurred from the trucking company or UPS would be debits to Shipping Expenses and credits to Accounts Payable.
   
   If you want to monitor the amount billed to customers for shipping, so it can be compared to the amount of expense incurred, you could have two Sales accounts: (1) Sales of Merchandise, and (2) Sales - Shipping Fees Billed. This second account can then compared to the amount in the Shipping Expenses account.