In-Transit Inventory
Definition
Inventory you own that is on its way to your warehouse, usually on a ship, truck or plane. It belongs on your balance sheet even though you cannot see it yet.
Want a deeper explanation?
Recording in-transit inventory keeps your balance sheet complete and your AP balanced when the supplier is already owed for goods you have not received.
A separate in-transit account makes the status clear. Watch for: supplier deposits and balances paid with no inventory recorded, which makes the business look poorer on paper than it is.
Example
At month-end you have a $95,000 container on the water under FOB terms. It is your inventory and should be recorded as in-transit, not left off the books.