Accounting for Goods in Transit (Explanation, Examples, Treatment, and Journal Entries)

What Is Goods In Transit?

Goods in Transit indicates the stock that is bought from the purchaser and delivered through a dealer, nonetheless, the merchandise is in transit but still needs to arrive at the proposed buyer.

Towards the ending of an accounting time frame, such stock items permit exceptional consideration for accounting such merchandise are neither accessible at the dealer’s space nor at the buyer’s location.


As a presumable possibility, these items can remain disregarded during the way toward representing overall stock as such products are not genuinely available at both the buyer’s or the vendor’s place.

The accounting of goods on the way demonstrates whether the dealer or the buyer of the products has the proprietorship and who has compensated for conveyance. Normally, there is an organization (dispatching terms) between the vendor and the purchaser with respect to who should record these items in the accounting records.

Goods in transit refer to stock and different sorts of stock that have left the transportation dock of the merchant, yet has not arrived at the receiving end of the purchaser. The idea is utilized to demonstrate whether the purchaser or dealer of products has collected the goods, and who is has to pay for transport.

Preferably, either the vendor or the purchaser should record products on the way in its accounting records. The standard for doing so depends on the delivery terms related to the goods, which are:

  • FOB shipping point. In case the shipment is assigned as freight on board (FOB) shipping point, proprietorship moves to the purchaser when the shipment departs the dealer.
  • FOB destination. In case of the shipment assigned as freight on board (FOB) destination, proprietorship moves to the purchaser when the shipment shows up at the purchaser.
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Example 1

ABC Inc. is the wholesaler and XYZ Inc. is the buyer. ABC Inc. ships stock worth $50,000 on March 15, 2020, and it still has to arrive at XYZ Inc.

Figure out the organization that may record the merchandise on the way in the accounting books in case the conditions of the delivery freight on board (FOB) transporting point.

FOB delivering point implies that XYZ Inc. (buyer) will take responsibility for stock when it departs ABC Inc’s. transporting area.

Thus, ABC Inc. will record a sales transaction on March 15, 2020, while XYZ Inc. may note it as transit inventory on a similar date.

Example 2

Here, ABC Inc. is the dealer and XYZ Inc. is the buyer, however, the terms of conveyance have been changed to FOB destination, and the shipment still has to arrive at XYZ Inc.’s. dock. The goods are required to be conveyed on April 5, 2020.

Figure out the organization that may note the goods in transit in their accounting books for such situation.

Under FOB destination, the buyer will note the sale contract on April 5, 2020, rather than March 15, 2020. Hence, for such a situation, XYZ Inc. will record the journal entry in the books of record on April 5, 2020.

Subsequently, there will be a contrast between the dealer and the buyer’s book attributable to the terms of shipment. While XYZ Inc. will note the exchange on April 5, 2020, however, ABC Inc. will record a similar exchange on March 15, 2020.

Goods In Transit Valuation

Recording stock relies upon the agreement with the vendor. Nevertheless, another concern is the goods in transit valuation, which should be perceived in the balance sheet.

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It is required to account for insurance, transport fees, freight in, shipping into the stock valuation. The issue is should the costs be accrued with goods in transit or wait until they show up.

This relies upon the arrangement of the capable individual over each cost. In case the purchaser is answerable for it, at that point he should assess the expense to make accrue costs as a component of the goods in transit.

The purchaser will make accrue when we have a commitment to the provider, consequently not all the costs will be recorded simultaneously with goods in transit.

Treatment of Goods in Transit

The consolidated financial statement consolidates the parent and subsidiary balance sheet and income statement. In case there are goods in transit throughout the reporting date, it must be guaranteed that both parties account effectively for those goods.

The goods in transit actually have a place with the group (parent and subsidiary); hence, the balance must be in the consolidated balance sheet.

Nonetheless, the goods should not be counted as double. This may occur if the parent doesn’t record the sale of products however subsidiary records stock and accounts payable.

The accounting treatment is outlined as follows:

When the forwarding specialist arranges the transportation archives, (for example, the bill of filling, receipt, or air waybill), at that time the journal entry can be:

Goods in transit recordXXXX 
Goods/ Invoice receipt record XXXX

At the point of the goods in transit but to get from the buyer client, then the journal entry can be:

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Goods/ Invoice receipt recordXXXX 
Supplier recordXXXX

At the point the product is gotten by the buyer, then the journal entry can be:

Stock accountXXXX 
Goods in transit account XXXX

For goods in transit accounting, the foremost problem to answer is if a deal has occurred, bringing about the entry of title to the purchaser. If so, the dealer records a sale and a receivable or money and excludes the good in the ending stock.

The buyer records the payable or the installment of money, the purchase, and takes account of the item for the completion stock.

Alternately, if the title has not changed or transferred, no purchase or sale has occurred, and consequently, the inventory is included for the seller’s ending inventory.


In short, goods in transit indicate at the time when the label of possession and threat goes from the vender to the purchaser.