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Level 1

Recording shipping and freight charges for a wholesale distributor

I have questions on setting up accounts for shipping and freight costs.  We are a industrial distributor of pipe, pipe fittings & valves.   We use QuickBooks Enterprise Solutions: Manufacturing & Wholesale 2018.

I have just taken over a position that was vacated about 2 months ago.  I am in process of cleaning up some of the bookkeeping mistakes made in the past.  

One of the areas in need of clean up is shipping and freight charges. I was hoping for some insight on how other companies have set up their accounts.


I will outline our company's different scenarios for shipping and freight charges incurred: 


1.   The first is pretty straight forward, inbound collect charges for inventory.  Inventory that is brought in via freight truck, flatbed or UPS for stock.  We incur some large charges because the weight and bulk of the items we resale.   The inbound charges is being logged as a Freight Cost under a COGS account.  


2.  Inbound freight that would be for special orders not on stocking orders, like a Next Day Air or 2 Day Blue, is charged to the customer on the invoice and is recorded to a shipping & delivery income account. 


3.  Outbound UPS or freight shipments to customers for PPD&ADD orders is charged on the customer invoice and is recorded to a shipping & delivery income account.  


 The prior bookkeeper paid all bills that were for flatbed charges, UPS or freight charges and recorded it under the Freight Cost COGS account. 


My thinking is I need to create shipping & delivery expense account to offset the income account and charge the appropriate accounts when I enter the bill for payment.  A good example of this is the UPS bill, we incur inbound charges for stock inventory & inbound charges for special customer orders (stock charged to COGS and special orders will be charged to the customer).  The UPS bill will also have outbound charges for orders shipped PPD&ADD and charged to the customer on the invoice.


Any input will be greatly appreciated.  

1 Comment 1
Level 4

Recording shipping and freight charges for a wholesale distributor

From my perspective, it sounds like we're over complicating the transaction.  From a business point of view, all invoices to the customer should be recorded as income, and all charges to you from the freight company should be coded to COGS.  If you charge more to the customer than you paid, naturally it will show as a profit on your P&L.  If you pass the exact cost to the customer, the income is naturally offset by the COGS on the P&L and you're fine.

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