Definition of Carriage Inwards
Carriage inwards refers to the transportation costs required to be paid by the purchaser when it receives merchandise it ordered with terms FOB shipping point. Carriage inwards is also known as freight-in or transportation-in.
Carriage inwards is considered to be part of the cost of the items purchased. Hence, for inventory items carriage inwards will be part of the cost of the goods available, the cost of inventory, and the cost of goods sold.
Example of Carriage Inwards
Assume that a company uses the periodic inventory method and it purchases goods with terms FOB shipping point. As a result the company is responsible for paying the cost of the carriage inwards. The company will record the amount 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, since an asset’s cost is defined as all costs that are necessary to get the asset in place and ready for use.
