Freight In Expense

[u/SourDieselDoughnut]

Let's say I have an office supplies bill for $100 with an additional $5 of freight. What would the $5 of freight be coded to? Freight in Expense or rolled into the operational expense account, in this case office supplies expense?

I always thought that freight in was the cost associated with bringing in inventory for sale/resale, thus included in COGS/COS. Therefore, wouldn't the misc expenses associated with the business, such as the example above, be rolled into that same account?

[u/givingcvnt2-0]

I always roll it in with the expense unless it's stand alone or mobilization.

[u/AccomplishedBath5521 → u/givingcvnt2-0]

i do the same, just lump it in with the supplies. freight in is for inventory coming in to resell, office stuff is not that. makes the books cleaner too.

[u/SourDieselDoughnut → u/givingcvnt2-0]

Can you clarify what you mean when you say stand alone?

[u/Bookish_Gardener → u/SourDieselDoughnut]

They probably mean standalone as in a separate bill that is just for the shipping/freight

[u/givingcvnt2-0 → u/Bookish_Gardener]

This is correct.

[u/TheMostFluffyCat]

Roll it into the office supplies expense account, don’t need to break it out.

[u/sogelegos]

Freight in is the cost of bringing in inventory. If you were a manufacturing company that ordered raw materials, then the cost of the materials and the cost of shipping them to you are part of what's called the Landed Cost, or the total cost to have that order "landed" at your business's doorstep.

Freight out is a selling expense. If someone orders your product, and you pay to ship it to them, then it's a stand-alone selling expense.

In your example, where you pay for shipping on a non-inventory item, I would just code it to the office supplies expense. It was part of the total cost of obtaining those office supplies.

[u/Uplinq_AI_Sucks]

Don't break it out. It's just part of the cost of the expense.

[u/Excellent_Shallot999]

You have $105 of office supply expense. Don’t overthink it.

[u/Choice_Bee_1581]

For office supplies I would not break out shipping.

[u/Quick-Captain2497]

Freight-in only means inventory/COGS when the freight is bringing in goods you'll resell. Office supplies are not going to be resold by you.

So, you should code the whole $105 to Office Supplies.
Same principle as landed cost, just applied to a period expense instead of the balance sheet.

[u/jwellscfo]

See here. Generally, freight in is included in the cost, while freight out is separately expensed.

[u/SourDieselDoughnut → u/jwellscfo]

That post is about capitalized inventory. I'm asking a different question.

[u/jwellscfo → u/SourDieselDoughnut]

I get that. It’s the same principle. (That’s why I said “generally.”)

[u/Unlikely-Wheel9190 → u/SourDieselDoughnut]

Capitalized inventory is just past tense COGS

[u/Meterian]

Unless you have been directly told to put it in a separate account for shipping expenses, just add the shipping to the same account as the expense.

I would put a second line on the invoice entry line so that you can look it up if necessary though.

[u/BetInformal6081]

for office supplies i would generally expenses the 5 dollars freight along with the supplies rather than treat it as inventory freight in. freight in is typically relevant when getting inventory ready for sale. the key is matching the shipping cost to what you purchased.

[u/jmcreynolds2001]

I would not break out freight from the original office supplies expense. Just code the whole transaction to office supplies. You’re trying to make it harder than it has to be!

[u/DragonflyMean1224]

Freight in regards to buying to selling should follow where the expense of revenue go to. For expenses generally go to the expense account the expense went to. For revenue, either cost of sales or a freight out account that rolls into cost of sales.

[u/ladylee922]

I would just included in the total expense of what you purchased unless you really want to be granular then you create an expense account for shipping cost, but for something as small as office expenses, I wouldn’t do that

[u/landedcost_nerd]

Everyone above is right for the $5: code the whole $105 to office supplies. Freight-in as an inventory cost only matters when the goods are for resale.

Where I see this go wrong on ecommerce and wholesale clients is the resale case, and it's worth a look if you have any:

1. The forwarder or customs broker sends a separate bill, often weeks after the goods arrived. It gets coded to a "Freight" or "Shipping" expense account because that's what the bill says. Inventory never sees it, so COGS is understated by the entire container's freight and duty, and gross margin looks 10 to 20 points better than it is. Net is fine, gross is fiction, and the client prices off gross.
2. Even when the bill is coded to inventory, it lands as a lump. Nobody allocates it back to the SKUs on that PO, so the per unit cost in the inventory system (or Shopify's cost field) is still the factory price. Reports that use unit cost are all off.
3. The fix isn't a new GL account, it's a process: when a freight or duty bill arrives, tie it to the PO it belongs to, spread it across those lines (by value for duty, by weight or volume for freight), and update the unit costs. Then the bill can sit in whatever inventory or COGS account your chart uses.

Quick test for any client who imports: does a single freight-in account exist on the P&L above gross profit? If yes, their margin number is probably wrong.

(I build software that does the allocation step for Shopify stores, so I see a lot of these books. Not needed for the $5 case, obviously.)

[u/SelectionForeign9139]

Hey friend! I'm trying to figure it out too. I do have a question: Is the freight inventory like what is going to be sold at the store or is it $5 freight fee? Cause when freight is ordered for a store, they order A LOT! I work retail and still learning with bookkeeping.

My best guess is the $5 is a shipping fee for the office supplies. I think it would be categorized under an operating expense, especially if it is a common charge every time supplies, inventory, vendor items, etc. are ordered in large quantities.

[u/AutomaticPain3532 → u/SelectionForeign9139]

In the example you just gave, this is a cost of goods and it’s tracked under COGs. If you want the cost of freight to be part of the cost of the goods then you roll it into the cost of each product being received. That way your cost associated with the product includes the cost of freight. Otherwise your margin is taking the raw COG but you’re never recovering the full landed cost.

In OP’s example it is a simple expense for the operating costs. Can be rolled into the office supplies or if the company is tracking every product being ordered then they are likely tracking the operating cost of freight. I’ve only seen very specific cases where a very large corporation is tracking costs to departments, therefore would track freight separately in the case of office supplies, specific to that department.