3.2 Carriage Inwards and Carriage Outwards

When a business buys goods from a supplier the cost of delivering or transporting the goods also has to be paid． In accountancy terms， this cost of transport is often referred to as‘ carriage’ ．

Carriage charges for transporting goods purchased into a business is known as carriage inwards ． When goods are purchased one supplier may include carriage within the purchase cost whilst another may charge separately for carriage． For example， suppose your business was buying exactly the same goods from two suppliers． One supplier might sell them for ￡ 100 and not charge anything for carriage． Another supplier might sell the goods for ￡ 95， but you would have to pay ￡ 5 to a courier for carriage inwards， i．e． a total cost of ￡ 100.In both cases， the same goods cost you the same total amount． It would not be appropriate to leave out the cost of carriage inwards from the ‘cheaper’ supplier in the calculation of gross profit， as the real cost to you having the goods available for resale is ￡ 100.When this happens the carriage inwards charge is always added to the cost of purchases in the trading account．

Carriage outwards is the cost of delivering the goods to the business's customers． It is an expense and not part of the selling price of the goods． Carriage outwards is always charged as an expense in the profit and loss account． It is never included in the calculation of gross profit．

Suppose that in the illustration shown in this chapter， the goods had been bought for the same total figure of ￡ 31，200 but， in fact， ￡ 29，200 was the figure for purchases and ￡ 2，000 for carriage inwards． The trial balance extract would appear as below in Exhibit 3.5.

Considering this carriage inwards， the trading account section of the statement of profit or loss would then be as shown in Exhibit 3.6.