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    Sunday
    Feb242013

    What are carriage inwards and carriage outwards?

    Carriage refers to the cost of transporting goods into a business from a supplier, as well as the cost of transporting goods from a business to its customers.

    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 to the goods produced in an accounting period. If this is a minor amount, it could just be charged to expense in the period incurred, with no inclusion in the overhead cost pool. 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 the company should charge the cost to expense in the period incurred. Thus, the cost of carriage outwards should appear in the income statement in the same reporting period as the sale transaction to which it relates. The cost of carriage outwards usually appears within the cost of goods sold section in the income statement.

    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?

     

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