In
accounting
Accounting, also known as accountancy, is the process of recording and processing information about economic entity, economic entities, such as businesses and corporations. Accounting measures the results of an organization's economic activit ...
, the concept of a freight expense or freight spend account can be generalized as a payment for sending out a product to a customer. It falls under the umbrella category of
expenses and is treated like other expense accounts in relation to the
accounting equation
The fundamental accounting equation, also called the balance sheet equation, is the foundation for the double-entry bookkeeping system and the cornerstone of accounting science. Like any equation, each side will always be equal. In the accounting ...
, however, under generally accepted accounting rules, if the freight is Freight expense has a normal
debit
Debits and credits in double-entry bookkeeping are entries made in account ledgers to record changes in value resulting from business transactions. A debit entry in an account represents a transfer of value ''to'' that account, and a cred ...
balance. Increases are recorded as debits while decreases are recorded as
credits. In relation to other accounts, the Freight Expense account is similar to the "Cost of Sales-Freight" account, but are two totally different entities. While the Freight Expense account is increased for payments towards outgoing goods, the Cost of Sales-Freight account is increased for payments towards incoming goods.
For example, suppose you have a business that imports and exports a type of product. When you deliver goods to customers and you pay for the delivery costs, you increase the Freight Expense account with a debit and the Cost of Sales-Freight is unaffected. However, when you purchase goods from a supplier and you pay for the delivery costs, you increase the Cost of Sales-Freight account and the Freight Expense account is unaffected.
Expense
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