Paid Freight on Goods Purchase Journal Entry

When a business purchases goods from a supplier, it often incurs freight charges, which are the costs associated with shipping the goods from the supplier to the buyer's location. These charges are separate from the cost of the goods themselves and must be recorded separately in the company's books.

The following is a guide to creating a journal entry for paid freight on goods purchase:

1. Identify the transaction
The first step in creating a journal entry for paid freight on goods purchase is to identify the transaction. In this case, the transaction involves the purchase of goods and the payment of freight charges.

2. Determine the accounts involved
Next, determine the accounts that will be affected by the transaction. In this case, the accounts involved would be:

- Purchases: This account represents the cost of the goods purchased.
- Freight-In: This account represents the cost of the freight charges.
- Cash or Accounts Payable: This account represents the payment made to the supplier.

3. Debit and credit the accounts
Based on the accounts involved, the following journal entry should be recorded:

Debit: Purchases
Debit: Freight-In
Credit: Cash or Accounts Payable

The Purchases account and the Freight-In account are debited to reflect the total cost of the goods and the freight charges. The Cash or Accounts Payable account is credited to reflect the payment made to the supplier.

4. Record the date and description
Finally, record the date of the transaction and a brief description of the purchase and freight charges in the journal entry.

Example:
On January 15th, 2021, XYZ Company purchases goods from ABC Supplier for $10,000 and pays $500 in freight charges. The journal entry to record this transaction would be:

Debit: Purchases - $10,000
Debit: Freight-In - $500
Credit: Cash or Accounts Payable - $10,500

Description: Purchase of goods from ABC Supplier and payment of freight charges.

Conclusion

In conclusion, paid freight on goods purchase is a separate expense that must be recorded separately in a company's books. The above guide provides a step-by-step process for creating a journal entry for paid freight on goods purchase, which involves identifying the transaction, determining the accounts involved, debiting and crediting the accounts, and recording the date and description.