Goods in transit
In one sentenceGoods shipped by the supplier that have not yet reached the buyer's warehouse; they belong to the inventory of whoever ownership has passed to under the contract terms.
Simply put
Goods on a truck or ship are not visible in the warehouse at the count, but they may already be yours. What counts is the shipping terms in the contract, not where the goods are.
If ownership passes on shipment, they are in your inventory even if they have not arrived; if it passes on receipt, they are still in the supplier's inventory.
Example
A spare parts importer bought a shipment for 80,000 SAR on the condition that ownership passes on shipment; it was shipped on 28 December and arrived on 5 January. At the 31 December close, the shipment is added to its inventory along with the liability to the supplier, even though it was not in the warehouse on the count day.