What is FOB shipping point and FOB destination explain with examples? In a FOB shipping point contract, the seller transfers any title of ownership to the buyer upon the product leaving the seller’s location. The
What is FOB shipping point and FOB destination explain with examples?
In a FOB shipping point contract, the seller transfers any title of ownership to the buyer upon the product leaving the seller’s location. The buyer then has full ownership. In a FOB destination sale contract, the buyer may not receive the title of ownership until the product reaches the buyer’s location.
What does FOB destination mean?
Free on Board (FOB) is a shipment term used to indicate whether the seller or the buyer is liable for goods that are damaged or destroyed during shipping. “FOB destination” means the seller retains the risk of loss until the goods reach the buyer.
Who pays the freight on FOB shipping point?
FOB (Freight on Board) Destination is a shipping term which means that the seller retains the legal title to the goods until they reach the location of the buyer. In this case, the seller pays for the transportation of the freight and takes care of additional freight charges until the goods reach the buyer.
Why is FOB shipping point important?
The terms FOB shipping point and FOB destination have significance in accounting because they determine the following: When a sale of goods and the related receivable occur. When the purchase of goods and the related liability occur. Whether the seller or buyer pays the shipping costs.
Does FOB include freight charges?
In simple terms, FOB price means the buyer has to bear the shipping costs completely. The seller pays the loading and freight costs from his premises up to the destination port. Then, the buyer has to arrange for the goods to be transported from the port to his premises.
What are the disadvantages of FOB?
Buyer will not be held responsible for any loss in-transit. Certain disadvantages of FOB Destination are: 1. Sellers will not be able to recover any loss once the goods have been on-boarded.