USA Ocean Freight and Additional Costs for COGS

[BReal]

We manufacture products and incur quite a bit of ocean freight as well as tariffs etc. I understand that you may add these expenses to the cost of goods for the item(s) however my question is more specifically how do you all recommend paying the ocean freight (expense?) while adding this cost to the cost of goods for the item using accrual accounting?

We are looking to avoid double counting the additional costs at the expense level and are using QBO.

 

[DrStrangeLove]

I'm not entirely clear what your question is asking. Are you asking: if the cost of shipping goods into the business is combined into the value of inventory, how do you pay the shipper for the shipping costs? Do I have that right?

I think (RNT, YMMV, please correct me if I'm wrong) that you could use a payable account when you book the cost of the inventory. So if you brought in $100,000 in goods with $1000 freight-in cost, you would book it as:

Inventory $101,000 DR
Accounts Payable - [Supplier] $100,000 CR
Shipping Cost Payable - [Shipper] $1000 CR

Then you'd debit the Shipping Cost Payable - [Shipper] account when you pay the shipper. I don't know Quick Books Online, so I can't help you with the implementation.

 

[BReal]

Thank you for your response. The question isn't so much how to handle payables but where to add the cost for shipping etc. Is this just added to the inventory value as it will be added to COGS upon selling?

 

[DrStrangeLove]

Yes, freight-in gets added to the inventory value (ASC 330-10-30-1: "As applied to inventories, cost means in principle the sum of the applicable expenditures directly and indirectly incurred in bringing an article to its existing condition and location.").