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General Accounting Discussions: journal entry for shipping costs

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    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
    • 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.
  3.  
    counter you are right nut we have to see carefully the current shipping laws and before taking any deceion made some important checks and analyze the market value!
    • CommentAuthorpk
    • CommentTimeDec 20th 2009 edited
     
    Dr. Accounts Receivable 10,050
    Cr. Sales 10,000
    Cr. Accounts Payable (shipping Co.) 50

    Dr. Cost of Sales 6,000
    Cr. Inventory 6,000


    you may also contact for any doubts at: savin.yakeep@yahoo.com
  5.  
    You did a good job and i must say that you are so nice!

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