Carriage inwards refers to the transportation costs associated with the purchase of merchandise or other assets. The buyer is responsible for the cost of carriage inwards when it buys items and the prices are stated as being FOB shipping point. Carriage inwards is also known as freight-in or transportation-in.
When goods or merchandise are purchased FOB shipping point and the periodic inventory method is used, the buyer will likely record the cost of the carriage inwards in the general ledger account Carriage Inwards (or Freight-in or Transportation-in). The carriage inwards costs are considered to be part of the cost of items purchased. In other words, part of the costs of carriage inwards should be assigned to the units in inventory and some should be assigned to the units that have been sold.
In the case of assets other than inventory items that are purchased FOB shipping point, the buyer should add the carriage inwards cost to the asset's cost. This is necessary because accountants define an asset's cost as all of the costs that are necessary to get an asset in place and ready for use.
To learn more, see the Related Topics listed below:
After working as an accountant, consultant, and university accounting instructor for more
than 25 years, Harold Averkamp formed AccountingCoach.com in 2003. His goal was to
share his knowledge and passion for teaching accounting with people throughout the
world at a very low cost. Read More...