Freight out is an addition to the Merchandise Inventory account if the seller uses the perpetual inventory system.

Question

Quizplus · Accepted Answer

Freight out, or shipping costs incurred by the seller to deliver goods to customers, is considered a selling expense and is not added to the Merchandise Inventory account. In the perpetual inventory system, inventory costs include the cost of goods purchased including any freight-in (shipping costs to receive goods) but not freight out.

Freight Out Is an Addition to the Merchandise Inventory Account