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.
Definition of Carriage Inwards
Carriage inwards is the shipping and handling costs incurred by a company that is receiving goods from suppliers. It does not include situations in which the supplier is absorbing the cost of shipping.
Accounting for Carriage Inwards
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.
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Definition of Carriage Outwards
Carriage outwards is the shipping and handling costs incurred by a company that is shipping goods to a customer. This does not include situations in which the customer is directly paying for shipping costs.
Accounting for Carriage Outwards
The company may be able to bill customers for the cost of carriage outwards; 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 accounting 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, since it is directly related to the generation of revenue.
Terms Similar to Carriage Inwards and Carriage Outwards
Carriage inwards is also known as freight in, and carriage outwards is also known as freight out.