freight-in
When you order a bookshelf online, the price you pay is not just the shelf — it is the shelf plus the shipping fee to get it to your door. To you, the real cost of owning that shelf includes the delivery charge. A business buying goods to resell faces the same thing: the cost of getting goods into the warehouse includes the shipping in. That inbound shipping cost is called freight-in.
Freight-in is the transportation cost a buyer pays to bring purchased inventory from the supplier to its own premises. Accounting treats it as part of the cost of the inventory, not as a separate operating expense — because, like the bookshelf delivery, it is a cost of acquiring the goods. So if a shop buys 10,000 of merchandise and pays 600 to ship it in, the inventory is recorded at 10,600. That added cost then flows into cost of goods available for sale, and eventually into cost of goods sold as the goods are sold.
It matters because lumping freight-in into inventory cost (rather than expensing it immediately) follows the matching principle: the shipping cost is recognized as an expense in the same period the goods are sold, not when they arrive. Do not confuse freight-in with freight-out — freight-out is the cost of shipping goods TO customers, which is a selling expense, not part of inventory. Mixing them up misstates both inventory and gross profit.
A hardware store buys 10,000 of tools and pays 600 to a trucking company to deliver them to its warehouse. The inventory is recorded at 10,600, not 10,000. When these tools are later sold, the full 10,600 of cost flows into cost of goods sold.
Inbound shipping is added to inventory cost, not expensed on its own.
Do not confuse freight-in (cost of receiving goods, added to inventory) with freight-out (cost of delivering to customers, a selling expense). They live in different parts of the income statement.