Accounting Dictionary

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FOB Shipping Point

Definition: The term FOB shipping point is a contraction of the term Free on Board Shipping Point." It means that the buyer takes delivery of goods being shipped to it by a supplier once the goods leave the supplier's shipping dock. Since the buyer takes ownership at the point of departure from the supplier's shipping dock, the supplier should record a sale at that point.

The buyer should record an increase in its inventory at the same point (since the buyer is undertaking the risks and rewards of ownership, which occurs at the point of departure from the supplier's shipping dock). Also, under FOB shipping point terms, the buyer is responsible for the cost of shipping the product.

If the goods are damaged in transit, the buyer should file a claim with the insurance carrier, since the buyer has title to the goods during the period when the goods were damaged.