Monday, 30 April 2012

Difference between Carriage Inwards and Carriage Outwards?



Difference between Carriage Inwards and Carriage Outwards?

Carriage inwards /or outwards refers to the costs of transporting goods to & from the firm. In the past, the purchase of goods would often result in two charges – the cost of the goods purchased & 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 the “carriage inwards”. Any such carriage charges should be debited to the carriage inwards a/c in the general ledger.

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

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

Any carriage outwards charges are 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 p&l a/c at the end of the accounting period.

Each type of carriage will be an expense & therefore will have a debit balance in the trial balance. However, these will appear in different sections of the trading & profit and loss a/c.
Accounting Treatment of Carriage Inwards and 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

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4 comments:

  1. ???? so which is the debit and which is the credit
    in the profit and loss acount ass that note is unclear

    ReplyDelete
  2. However, I definitely recommend you do not follow this path because as a business owner, you will know a lot about your business; however, it is unlikely that you are a tax expert too. UK accountant

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