Goods-in-Transit
Goods-in-transit are items that have left the seller's premises but not yet arrived at the buyer's, so they are physically at neither location on the date of a count. Ownership at that moment is settled by the delivery terms agreed between the parties, not by where the goods happen to be. Whichever party holds title must include them in its own inventory.
What Is Goods-in-Transit?
At any cut-off there is always some inventory that is nowhere. It has left one warehouse and not reached the next, so a count at either end will miss it entirely, and yet it belongs to somebody and appears on somebody's accounts. Which party carries it turns on whatever shipping terms the two sides struck, and never on where the lorry happens to be.
The balance is examined more closely than its size usually warrants, because it is the one account where a difference can sit and look legitimate. Goods genuinely on a lorry clear within a predictable period, so a transit figure that persists across successive period ends, or that is a similar size at each one, is not describing a journey. Evidence is required from both ends: a despatch note from the sending location and an acknowledgement from the receiving one. A transit balance supported only by the gap between two records is not evidence of transit at all.
Who Owns the Stock Under Goods-in-Transit
Title turns on the delivery basis the parties contracted on, not on the vehicle's position.
- Where the terms pass risk at the seller's premises, the buyer owns the goods from loading and carries them in inventory throughout the journey, including at any cut-off falling inside it.
- Where risk passes on arrival, the seller retains them until they are received and must include them despite having despatched them.
- The practical test is the contract and the transport documentation, since a consignment note showing who bears the risk settles the question faster than any argument about where the lorry is.
- The balance sheet consequence is symmetrical: exactly one party should be carrying the goods. Both carrying them, or neither, is the error this test exists to catch.
- Whichever party carries them also carries the insurance exposure for the journey.
How Goods-in-Transit Works in Practice
- Goods leave the seller's premises against a despatch document and a transporter's consignment note, and where the value requires it an electronic movement permit is generated.
- Ownership while the consignment moves follows the delivery basis struck in the contract, nothing else. That, and not the vehicle's position, decides whose inventory they belong to at any moment.
- At a cut-off, whichever party holds title includes them in its reported stock even though a count at either location will not find them.
- Supporting evidence is assembled from both ends: the despatch note from the sender and the acknowledgement from the receiver once the goods arrive.
- The balance clears when the goods are received and booked. Anything still sitting in the account after a normal transit period is investigated as a difference rather than carried forward as a timing item.
Goods-in-Transit: A Worked Example
| Consignment | Terms | Despatched | Received | In whose stock at 31 March |
|---|---|---|---|---|
| Inbound, Rs 34,00,000 | Ex-works | 27 March | 3 April | Buyer's, though not on site |
| Inbound, Rs 18,00,000 | Delivered | 29 March | 2 April | Seller's |
| Outbound, Rs 46,00,000 | Ex-works | 30 March | 4 April | Customer's |
| Outbound, Rs 12,00,000 | Delivered | 31 March | 5 April | Still the despatcher's |
A Jamnagar brass unit has four consignments on the road at year end.
Possession is not the test; the delivery term is. The first line sits in the buyer's stock although nobody at the buyer's site has seen it, because title passed at the seller's gate. The last line is still the despatcher's despite having left the premises. A count of what is physically present will therefore miss Rs 34 lakh that belongs in the figure and may wrongly include Rs 12 lakh that has gone. The reconciliation is done from despatch documents and the terms on each order, and it is the single largest source of year-end differences between a physical count and a book figure.
Common Mistakes With Goods-in-Transit
The balance is small, easy to justify and therefore easy to abuse.
- Supporting it only with the difference between two records, which is not evidence that anything is actually on a vehicle.
- Determining ownership from where the goods physically are rather than from the shipping terms the parties agreed.
- Letting the balance persist across successive period ends, when goods genuinely in transit clear within a predictable window.
- Counting the same consignment at both ends because the two locations were counted on different dates, which inflates the consolidated position.
- Omitting it entirely from the reported figure, so stock the business owns and has paid for appears nowhere at all.
- Treating a persistent balance as a timing difference rather than investigating it, when goods that never arrive are a loss and not a delay.
Need Help With Goods-in-Transit?
Reading about it settles the meaning and nothing else. The moment stock is spread across locations and somebody has to reconcile it, the position has to be established independently, which is the substance of warehouse stock audit. A location list and the current records are enough to scope it.