FOB

  • Creator
    Topic
  • #2012126
    FutureCPA
    Participant

    Can someone please explain to me FOB Destination and FOB Shipping as it relates to the audit part of the exam. I know this topics comes up when discussing journal entry adjustment.

    Thank you.

    I need to pass before busy season.

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    Replies
  • #2012390
    Mike J
    Participant

    You have to know whether the entity owns the inventory or asset. The exam LOVES to test your awareness of dates. So depending on when title passed, the entity must recognize a sale or a payable or when you add/remove an asset.

    FOB destination–title doesn't pass until delivered. FOB shipping–title doesn't pass until the goods are made available by the seller to be shipped; specific items are separated from inventory.

    So, this tests management's cutoff and rights assertions. Possibly it tests valuation.

    Hope this helps.

    #2015423
    FutureCPA
    Participant

    Thank you very much! I was so wrong about my understanding of this area. Thank you!

    I need to pass before busy season.

Viewing 2 replies - 1 through 2 (of 2 total)
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