Difference between Carriage Inwards and Carriage Outwards?

Difference between Carriage Inwards and Carriage Outwards?

 

carriage inwards or outwards Carriage refers to the costs of transporting goods to and from the firm. In the past, the purchase of goods would often result in two charges – the cost of the goods purchased and the cost of having them delivered to the business premises.

From the buyer’s point of view, the delivery charge would he referred to as “carriage inwards”. Any such carriage charges should be debited to the carriage inwards account in the general ledger.

The carriage inwards account is written off to the trading account at the end of the accounting period.

When the buyer sells the goods to his customer, he incurs further delivery charges. This cost is referred to as ‘carriage outwards”.  This costs are debited to the carriage outwards account in the general ledger.

Any carriage outwards charges are usually included in an item called ‘selling and distribution costs”.   Since this cost is incurred after the goods have been made ready for sale, the account is written off to the profit and loss account at the end of the accounting period.

Each type of carriage will be an expense and therefore will have a debit balance in the trial balance. However, these will appear in different sections of the trading and profit and loss account.

Accounting Treatment of Carriage Inwards and Carriage Outwards

 

Carriage Outwards 

Journal  Entry for Carriage Inwards:

Debit   Carriage Inwards

Credit    Bank

Journal  Entry for Carriage Outwards:

Debit   Carriage Outwards

Credit    Bank

Treatment in Trading, Profit and Loss Accounts:

Carriage inwards Trading account expense
Carriage outwards Profit & loss account expense

Summary:

Carriage inwards is connected with the cost of getting goods into the business and ready for sale. As a result, it will be added on in the calculation for the cost of goods sold. Carriage outwards does not have anything to do with the cost of getting goods into saleable condition. Therefore it will appear with all the other overhead expenses and the profit and loss account.

Good to know:

Nowadays, the price quoted for goods being purchased will usually be inclusive of any delivery charge, and so a separate charge for carriage inwards (or outwards) is not very common. In cases where separate carriage inwards charges are incurred, the cost should be added on to the cost of purchases in the trading account. Consequently, a proportion of carriage inwards charges should be added to the purchase cost when determining the cost of closing stock.

 

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  • visionpirate

    (in case) if we cant make a sale without a delivery(we have the responsibility of making a delivery on our customer’s demand) we will have to pay the carriage outwards, then why will we not charge the delivery cost in the sales ?

  • biohazard

    actually i have gone through a lot of forums about this topic, but no one is giving me any reasonable answer.

  • Anonymous

    hi visiopirate/biohazard,

    this is a good question. an example of your description of such business would be DELL computers – selling directly to customers online and making delivery them.

    In general, carriage outwards is categorised as selling and distribution costs as compared to manufacturing (and associated costs like wages and insurance on the goods) + delivery (carriage inwards) costs according to US GAAP or Singapore’s FRS principles.

    However, one of key principles of good accounting is that the information presented is reliable and understandable by its users.

    If it makes sense for a company to account for carriage outwards as part of the COGS due to the nature of the business (as per your example), the accountant may choose to do so.

    It is good practice to make footnotes on why it is accounted this way as it is a departure from the generally accepted accounting principles. Public companies are required by law to do so.

  • tingting

    hello Caleb, i have a question regarding Net Realisable Value (NRV)
    NRV= estimated selling price in the ordinary course of business – estimated costs of completion and the estimated costs necessary to make the sale

    so i wonderif carriege outwards is part of the ‘estimated costs necessary to make the sale’

    thank you

  • Jimmy

    Hi TingTing,

    NRV = Inventory Sales Value – Estimated Cost of Completion and Disposal

    In real life, during realisable of resale goods, these goods may have to deliver to the customer’s site or buyer’s warehouse. So, you may consider this delivery as part of the entire cost of complete and disposal of your resale goods.

    But in your books, I would suggest you to split between carriage outwards and the above cost. Treat deliveries or freight of normal trading goods as carriage outwards. Create new account e.g. – “realisable goods cost” when you have to carry out this realisable goods transactions.

    Hope my idea is clear to you.

  • Rahab Ngendo

    what are the actually in short the defination of carriage inward and carriage outward

  • Nklongyut

    In trading account, there is ‘less: carriage inwards’ 
    how about carriage outwards ?

  • guest

    is carriage on sales carriage outwards?

  • anil

    which expenses come under carriage inword and out word?

  • christy

    didn’t really help but thanks anyway wasn’t really what i was looking for

  • Simran_bubbles

    Yes since it is transportation of goods and services purchased by the business for sale purpose

  • Samigaysamuels

    Should carriage inwards or outwards enter in the general journal

  • Zk

    So carriage inwards is in expenses?

  • Christina

    hi yes it is an expense….

  • noone

    i m not getting …..carriage inward or outward

  • L.r

    Brilliant thanks