Freight out

Freight out is the transportation cost associated with the delivery of goods from a supplier to its customers. This cost should be charged to expense as incurred and recorded within the cost of goods sold classification on the income statement. Freight out is not an operating expense, since the supplier only incurs this cost when it sells goods to a customer (rather than incurring it as part of day-to-day company operating activities).

If the cost of freight out is billed to customers, do not net these billings against the freight out expense account. Instead, the revenue is to be reported separately from the freight out expense.

In some cases, the amount of unreimbursed freight out is so small that the balance in the freight out account is aggregated into the "other cost of goods sold" line item in the income statement.

If a profitability analysis by customer is developed, the cost of freight out should be included, since this can sometimes result in a significant reduction in profits by customer.

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