What account do you assign Shipping to when you shipped an order online and you have received payment for the shipping and handling charge? Is this an expense or income account? (2024)

FAQs

What account do you assign Shipping to when you shipped an order online and you have received payment for the shipping and handling charge? Is this an expense or income account? ›

The shipping is income and expense. On your invoice set up your Shipping Charge Item and link it to an Income Account. When you pay the shipper, set up a Shipping Expense Account and use that as your expense.

If you track your expenses by product, then shipping would likely fall under your "inventory expenses". This would include all the costs associated with acquiring and storing inventory, like raw materials, manufacturing costs, and shipping.

A shipping cost is an expense known as “freight out.” Freight out is a type of cost of goods sold (COGS) expense, not an operating expense. So, record shipping costs under the COGS section on your income statement.

Select the sales transaction you want to enter. Choose the name of the customer from the dropdown menu. Then select Shipping Charge from the Product/Service column. Assign a class to the shipping charge by selecting the dropdown menu of the Class column.

Shipping is an interesting character in the bookkeeping world. Yes it is income IF you charge the customer more for the service than what you pay out. Use the income account on your invoices to show where you charged for the shipping. Then you use the expense accout to show where you paid Fedex, UPS, US Postal, etc.

Typically there is an expense account in the Cost of Sales section of your Profit and Loss Statement for shipping and it is used in this situation.

In your situation, the shipping expenses would be considered a normal/general business expense and not cost of goods sold. Containers and packages that are an integral part of the product are a part of your cost of goods sold.

A Shipper account is the account that will be used to process a shipment. The Payer account is a third party account that the shipping costs will be charged to.

A shipping and handling fee is the amount that's charged a customer, aside from the order subtotal, to cover shipping and handling costs. This fee covers the cost of fulfilling the given customer's order, including storage costs, packaging, shipping, and the like.

If you send the freight out cost to the customer, you can record it as an unpaid bill in the income statement next to the freight expense. This way, when the customer pays, it can offset the cost. You may have a negative freight out expense depending on what you charge the customer and what you pay for the invoice.

How do I account for shipping income in QuickBooks? ›

The shipping expenses are held in inventory until sold, which means these costs are reported on the balance sheet in Merchandise Inventory. When the merchandise is sold, the shipping charges are transferred with all other inventory costs to Cost of Goods Sold on the income statement.

California sales tax may apply to charges for delivery, shipping, and handling. To help you apply tax properly in your business, we've created the quick reference guide (see Applying Sales Tax). It gives examples of common shipping situations and charges and explains how sales tax applies in each situation.

As mentioned above, inbound shipping costs are part of COGS. However, shipping to the consumer is not. It's important to stay on top of these expenses as they affect your bottom line significantly and can eat away at your profit if you don't have a shipping cost reduction strategy in place.

While inbound shipping costs are considered COGS (Cost of Goods Sold), shipping to the consumer or outbound order shipping cost is not. Shipping costs must be carefully monitored in an effort to maximize ROI. Many factors play into the Cost of Goods Sold (COGS).

First, go to the "Lists" menu and select "Products and Services. Then, click the "New" button and select "Service" from the drop-down menu. In the "Item Name/Number" field, enter something like "Shipping Charges," then scroll down to the "Sales Price/Rate" section. And enter the amount you want to charge for shipping.

Yes, shipping costs to ship resale items to buyers are a business expenses. If the item sells for $50, for example, and shipping cost is $5, you would report $55 in revenue (amount paid to you by customer) then report $5 to 'Shipping Costs' on your Schedule C.