 Hello in this lecture we're going to find the term or the abbreviation in this case of FOB. According to fundamental accounting principles while 22nd edition the definition of FOB is abbreviation for free on board the point when ownership of goods passes to the buyer FOB shipping point or factory means the buyer pays shipping costs and accepts ownership of goods when the seller transfers goods to the carrier FOB destination means the seller pays shipping costs and the buyer accepts ownership of goods at the buyer's place of business. So when we think about FOB the abbreviation we're talking about free on board it might we're talking about when do the goods changed hands does it change hands at the shipping point or at the point of destination. Let's take a look at an example if we have company A and company B here and we're shipping inventory this ink by boat in this case question is when does the ownership change hands does it change hands at the point in time that the ink goes on the boat or does it change hands at the point of times that the boat reaches the destination if it changes hands as of the time that it goes on the boat we're going to call that FOB shipping point meaning at this point in time at the shipping point in time it is now the new company's responsibility they own that ink now probably going to be paying for the shipping and if pirates take the ship on the way over it's going to be the responsibility of the new owner in this case on the other hand if we're saying that the shipping FOB destination we're saying that the inventory does not change hands and is not recorded as inventory on owner's B records until it has reached the destination that's going to be FOB destination that would mean that the prior owner the sender the seller would be responsible for it during that shipping process and only at the point of destination does the new owner then record it as inventory