Question: Goods in transit are included in a purchaser's…

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Anu Bhardwaj · Accepted Answer

✅ Question 1: "Goods in transit are included in a purchaser's inventory." Option 1: "At any time during transit." ❌ Incorrect. Goods are not automatically included in the purchaser’s inventory just because they’re in transit. Ownership depends on the shipping terms —specifically, whether it's FOB shipping point or FOB destination . Option 2: "If the goods are shipped FOB shipping point." ✅ Correct. Under FOB shipping point , ownership transfers to the buyer when the goods leave the seller’s dock , even if the goods are still in transit. So the buyer should record them as inventory at that time. Option 3: "When the supplier is responsible for freight charges." ❌ Incorrect. Responsibility for freight charges does not necessarily indicate ownership . A supplier may pay for freight even if the buyer owns the goods at shipment (e.g., for customer service reasons). Ownership is determined by the FOB terms. Option 4: "If the goods are shipped FOB destination." ❌ Incorrect. Under FOB destination , the seller retains ownership until the goods reach the buyer . Therefore, goods in transit under these terms are not yet part of the buyer’s inventory . Option 5: "After the halfway point between the buyer and seller." ❌ Incorrect. This is not a valid accounting rule. The physical distance covered in transit does not determine ownership. It’s only the agreed shipping terms that matter. ✅ Question 2: "Consignment goods are:" Option 1: "Goods shipped by the owner to the consignee who sells the goods for the owner." ✅ Correct. This is the definition of consignment. The consignor (owner) sends goods to a consignee (agent) to sell on their behalf . Ownership stays with the consignor until the goods are sold. Option 2: "Reported in the consignee’s books as inventory." ❌ Incorrect. Consignees do not record consigned goods as inventory because they do not own them . The goods remain on the consignor’s inventory records. Option 3: "Goods shipped to the consignor who sells the goods for the owner." ❌ Incorrect. This reverses the relationship. The consignor is the owner and the one handling the shipping, not the recipient. The consignee is the one who receives and sells the goods. Option 4: "Not reported in the consignor’s inventory since they do not have possession of the inventory." ❌ Incorrect. Even if the consignor doesn’t have physical possession , they still own the goods. Therefore, the inventory remains on their books until sold. Option 5: "Always paid for by the consignee when they take possession." ❌ Incorrect. Consignees don’t purchase the goods when they receive them. They only pay the consignor after they sell the goods, usually deducting their commission.

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Anu Bhardwaj

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