Final answer:
Goods in transit are included in a purchaser's inventory if the terms are FOB shipping point. These terms mean ownership transfers to the buyer once the goods ship, affecting the buyer's financial reports and decision-making.
Step-by-step explanation:
Goods in transit are considered part of a purchaser's inventory if the terms of delivery are FOB (Free On Board) shipping point, meaning that ownership of the goods transfers to the buyer as soon as the goods leave the seller’s location. On the other hand, if the goods are shipped FOB destination, they are not considered part of the buyer’s inventory until they arrive at the buyer's location.
For accounting and business reporting purposes, it is essential to know when goods should be included in inventory. This not only affects the balance sheet but also influences the cost of goods sold and ultimately the net income reported for the period.
Including goods in transit correctly in inventory is also important for accurate financial analysis and decision-making. Managers and accountants must therefore ensure that inventory levels reported reflect all goods that the company legally owns at the time of reporting, including those that are still in transit under FOB shipping point terms.