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   Delivery Expense
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Delivery Expense
What is delivery expense?

Definition

Delivery Expense refers to cost incurred by a business in transporting its goods to customers. It includes gas and oil costs, payments to third-party delivery companies, and other transportation costs.

Also known as: Freight Out, Transportation Out, Gas and Oil

Classification and Presentation of Delivery Expense

Delivery Expense is an expense account. It is part of operating expenses in the income statement. If the company classifies expenses into General and Administrative Expenses and Selling and Distribution Expenses, "Delivery Expense" is part of Selling and Distribution Expenses.

Delivery expenses pertain to costs incurred by the business in getting its products to the hands of the customers (outward delivery). If the business shoulders the delivery costs of items it purchased from a supplier (inward delivery), the cost is considered as 'Freight In" and not "Delivery Expense'.

Freight In vs. Freight Out

"Freight In" includes costs incurred by the business in transporting its purchases into its premises. These costs are inventoriable, meaning, they become part of the cost of "Inventory".

"Freight Out" costs or delivery expenses are not inventoriable. They are selling expenses.

Delivery Expense Journal Entries

The journal entry to record delivery expense is:

"Delivery Expense" is debited to record the cost incurred. "Cash" is credited if the amount is paid. If the amount is yet to be paid, a payable account (such as Accounts Payable) is credited instead.

Examples

1. GONDO Company incurred and paid $50 for gas and oil used in transporting furniture products to its customers. The journal entry would be:

2. JIM Enterprise makes use of the services of JACOB Movers, Inc. in delivering its products to customers. JIM received a bill summarizing the delivery charges amounting to $600. JIM will pay the amount next month. The journal entry to record the delivery expense would be:

In the entry above, a liability account was credited since the amount is yet to be paid.