Free on board, most commonly called FOB, is a shipping term that has much significance in the accounting for a firm’s ASSETS. There are two FOB situations: FOB shipping point and FOB destination. When a seller needs to ship goods to a buyer, the two parties will negotiate the manner in which the goods are transported, either FOB shipping point or FOB destination. The shipping point is usually the seller’s shipping docks, and the destination is usually the buyer’s receiving docks. When goods are transported FOB shipping point, the title (ownership) to the goods being shipped is passed to the buyer at the shipping point—that is, when the goods leave the seller. Though the buyer may not receive the goods for several days or weeks, it is the buyer who now owns the goods and must include them in his inventory, despite the fact that he doesn’t have physical possession of them. It is also the buyer who is liable for the goods while in transit, as it is he who owns them. Because the goods were shipped “free on board,” the shipping agent (transportation company) will send the freight bill to the buyer, the owner of the goods while in transit. When goods are transported FOB destination, the title (ownership) to the goods being shipped is not passed to the buyer until the goods reach their destination. Thus the seller owns the goods while they are in transit, and it is she who is liable for the goods while they are being transported. The seller will continue to include the shipped items in her inventory until such time as they reach their destination. The freight bill will be sent to the seller, the owner of the goods while in transit.