Inbound Freight in a consumer branded goods business is the cost of shipping, duties, and tariffs to get parts and ingredients to the manufacturer and finished goods from the manufacturer to the warehouse, before products are ordered by and shipped to the consumer.
Inbound freight, also called freight-in, is a cost of acquiring inventory. Under 📝Accrual Accounting it is added to the carrying cost of inventory on the balance sheet and reaches the 📝Income Statement as part of cost of goods sold when the product is sold, rather than appearing as a separate operating expense.
It is distinguished from outbound freight, the cost of shipping orders from the warehouse to customers, which is usually reported as a fulfillment or selling expense. Customodal's "Inbound vs Outbound Freight - 4 key differences" lays out the operational differences between the two. Because allocating freight to each unit received is complex for a brand without an enterprise ERP, 📝Simplifying Inbound Freight Accounting describes an accrued freight method that expenses inbound freight in COGS as a rolling percentage of product costs.