Freight-in Account Used to report transportation charges on merchandise purchased. FOB shipping point means the transportation charges are paid by the buyer and are debited to the account. FOB destination means that transportation charges are paid by the seller and the freight-in account is not used. Computation of Gross Profit Net sales minus cost of goods sold equals gross profit. Merchandise available minus ending inventory equals Cost of Goods Sold.
Gross profit tells management the amount of sales revenue that are left to cover operation expenses.
A special journal used to record only purchases of merchandise on account. A separate ledger containing an individual accounts payable for each supplier. The controlling Accounts payable account is maintained in the general ledger. For purchase returns and allowance use the General Journal for journal entries to record the transaction. Cash Payments Journal Used to record all types of cash payments.