What does FOB destination mean?

What does FOB destination mean?

• A. Ownership transfers upon arrival at destination
• B. Ownership transfers at shipping point
• C. Ownership transfers when payment is made
• D. Ownership transfers at warehouse

Answer: (A)

FOB destination means the seller keeps ownership and bears the risk of loss until the goods reach the buyer's location. The seller typically pays the freight, and ownership passes to the buyer only when delivery occurs at the destination. In accounting terms, revenue is recognized when title passes at delivery, and the buyer records inventory only after the goods are received. This differs from FOB shipping point, where ownership and risk transfer to the buyer as the goods leave the seller’s premises, with the buyer assuming freight costs from that point.

FOB destination means the seller keeps ownership and bears the risk of loss until the goods reach the buyer's location. The seller typically pays the freight, and ownership passes to the buyer only when delivery occurs at the destination. In accounting terms, revenue is recognized when title passes at delivery, and the buyer records inventory only after the goods are received. This differs from FOB shipping point, where ownership and risk transfer to the buyer as the goods leave the seller’s premises, with the buyer assuming freight costs from that point.