freightout

Freightout, or freight-out, is the transportation cost incurred by a seller to deliver goods to customers. It is typically classified as a selling expense and appears on the income statement as a separate line item within operating expenses, often under distribution or order-fulfillment costs. Freight-out is distinct from inbound freight (freight-in), which covers transportation costs paid to obtain goods and is usually capitalized as part of inventory or included in cost of goods sold, depending on the accounting method.

Presentation and policy: If the seller bears the shipping costs under the terms of sale, the expense is recorded as freight-out. If the customer pays for shipping separately, the seller may recognize shipping charges as revenue and the related cost as an expense, depending on company policy. In practice, many companies show freight-out strictly as an expense, while any shipping revenue is recorded as a separate line item.

Journal entries: When the seller pays the freight, a typical entry is to debit Freight-out expense and credit cash or accounts payable. If shipping charges are billed to the customer as a separate fee, the entry may include debit accounts receivable and credit freight revenue (or shipping revenue), reflecting the revenue from shipping as appropriate to the policy in use.

Context: Freight-out is common across manufacturing, wholesale, and retail settings and is a factor in analyzing gross margin and distribution efficiency. Related terms include inbound freight (freight-in), FOB shipping point, and FOB destination.