What does the term "f.o.b." mean in accounting?

The term "f.o.b." in accounting refers to freight on board or free on board. Contracts between buyers and sellers usually indicate that goods are either f.o.b. destination or origin, which affects who owns the inventory and is liable for it while in transit, according to QuickBooks.

An f.o.b. destination means the seller retains title to goods until the items reach their destination, making the sellers liable for damage or loss during shipment. An f.o.b. origin means that buyers own the goods as soon as the sellers ship the items, leaving the buyers liable for damage. Accountants examine a shipment's f.o.b. designation to determine whether inventory remains on a company's books at the end of a quarter or fiscal year, notes QuickBooks.