 The proper time to recognize sales revenue is often when ownership of goods changes hands between the seller and the buyer. This point is determined by the shipping terms in the sales contract. There are two terms used to determine this and they are legal terms used in contract law. FOB shipping point and FOB destination. FOB means free on board. When goods are shipped FOB shipping point, ownership changes hand and revenue is recognized at the point when the goods leave the seller's shipping dock. When goods are shipped FOB destination, ownership changes hand and revenue is recognized at the point of delivery to the customer. Again, these terms are important because they determine who and when revenue is recorded as well as who owns and reports the inventory on the trucks.