Costs added to inventory: Transportation costs

deliveryEarlier we mentioned that all costs incurred to get inventory ready for sale is added to the inventory. However, only the costs that the business is responsible for is added to inventory. In the case of transportation costs,  the cost of shipping is added to the inventory only when the business pays to get the goods delivered.  Since the business is responsible for the costs of delivery from the shipping point,  the terms given to postal carrier to deliver the goods is FOB shipping point. The cost is added to the inventory account.