What are carriage inwards and carriage outwards?

Carriage refers to the cost of transporting goods into and out of a business.

Carriage inwards is the shipping and handling costs incurred by a company that is receiving goods from suppliers. The most appropriate accounting treatment of carriage inwards is to include it in the overhead cost pool that is allocated between ending inventory and the cost of goods sold. If this is a minor amount, it may also be charged to expense in the period incurred. Thus, depending on the accounting treatment, it may first appear in the balance sheet as an asset, and then shift to the cost of goods sold in the income statement as goods are sold.

Carriage outwards is the shipping and handling costs incurred by a company that is shipping goods to a customer. The company may be able to bill customers for this cost; if not, then it should charge the cost to expense in the period incurred. Thus, it should appear in the income statement immediately.

Similar Terms

Carriage inwards is also known as freight in, and carriage outwards is also known as freight out.

Related Topics

Journal entries for inventory transactions
Overhead allocation
What are goods in transit?
What is the overhead rate?
When do I take inventory ownership under FOB terms?