When a business transports goods to its customers at this point the goods are already on the shelf so any cost incurred after that cannot be added to inventory. When the business sends goods out to the customers, the terms given to the postal carrier is FOB destination which means the seller is responsible for the goods till it reaches its destination. Costs that a business incurs in sending goods to its customers is called transportation-out costs. Transportation expense is reported on the income statement as an operating expense in the section below the gross margin.