Transportation-out definition
/What is Transportation-Out?
Transportation-out is the freight cost incurred by a seller to ship goods to its customers. This cost is charged to expense as incurred. Some or all of this cost may be offset by freight billings charged to customers, unless the seller is offering free delivery to its customers.
Example of Transportation -Out
Free Weights Corporation sells kettlebells to its exercise-crazy customers. One customer orders a complete set of kettlebells, which weighs 300 pounds. The freight cost of this shipment is $150. The company sells under a free shipping promise, so the customer pays the invoiced amount of $800 for the kettlebells, while Free Weights absorbs the $150 freight cost. The journal entry to record the cost of this transportation-out is as follows:
Transportation-out can be considered a selling expense that falls within the reporting for the sales department. However, since it is only incurred when a product sale is made, a better location for it is within the cost of goods sold line item on the income statement.