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Inventory: It refers to the total stock of such goods or items which are held by the business organizations with the purpose of sale.
Consigned goods: Consigned goods are those goods which are given further to agents to perform the function of sale. The risk and ownership of the consigned goods always remain in the hands of the company which is the consignor of those goods, till goods are unsold.
Free on board (FOB): It refers to the term of sales, which states who will be liable for the risk related to the damage of goods in transit. This liability can be of seller or buyer, depends upon the condition.
The types of free board are:
- Free on board (FOB) shipping point
- Free on board (FOB) destination
FOB shipping point: In free on board (FOB) shipping point, ownership of goods transferred from seller to buyer with the transfer of goods to the goods carrier.
FOB destination: In free on board (FOB) destination, the ownership and risk related to goods to be sold will remain with the seller till the date on which consignment will be actually received by the buyer.
To determine: The correct amount of inventory of W Company on December 31.
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Chapter 6 Solutions
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