There are various terms used when goods are being transferred from a buyer to a seller. The two common terms are FOB shipping point and FOB destination. FOB is meant to stand free on board. The difference between these two terms is that the under FOB shipping point, the ownership of the goods is transferred from seller to buyer at the place of shipping whereas the latter means that the buyer gains ownership of the goods when they get to the destination. With the former, the buyer has to pay for the goods before they can be delivered (Needles & Crosson, 2014). The seller does not assume responsibility for the goods once they are past the shipping point. In FOB destination, the seller shall be answerable if anything happens to the goods before they get to the required destination. It is also important to note that in FOB shipping point, the buyer assumes the cost of transporting the goods to the destination while in the other the seller shall take care of the costs incurred until the goods get to the destination. For uninsured goods, the best option would be FOB destination as the seller will be liable to make amends if anything happens to the goods and also the company will incur fewer costs as the transportation is on the seller.
Perpetual Inventory refers to a system of updating inventory at the point of sale, that is immediately a sale or purchase is made through computerized systems (Needles, Powers & Crosson, 2010). It gives accurate information as concerns the amount in stock and enables efficient decision making. Periodic inventory, on the other hand, is seasonal or periodic in that at the beginning of a season, goods are counted and recorded then at the end of it, what is left is also counted. This method is difficult to use since there is no accurate record of when the purchases or sales were made, and anything that may have happened to the items in question is not documented. With the advent of computers, may companies use perpetual inventory systems. However, there are those who prefer the periodic inventory system. Small companies, such as small business, prefer this because they do not have extra cash to invest or because they do not have large stock or many items to inventory.
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References
Needles, B. E. & Crosson, S. V. (2014). Principles of Accounting . Boston, US: Cengage Learning.
Needles, B.E., Powers, M. & Crosson, V.S. (2010). Financial and Managerial Accounting . Boston, US: Cengage Learning.
