Is Carriage Inward a Direct or Indirect Expense?

by Anonymous

Q: Is carriage inward a direct or indirect expense?


A:
I assume you're talking about direct and indirect costs of a manufacturing business.

Direct and indirect costs are discussed in the
lesson on the manufacturing cost statement.

Carriage inward is part of the direct cost of the raw materials you purchased. In this instance (carriage for raw materials) it would not be counted as a separate expense but would form part of the cost of the asset.

I.e. you buy $1,000 of wood and the transport costs are $100 to bring it to your business. So the wood is valued in your records at $1,100.

This goes back to the rule that
an asset's value includes all costs necessary to get it to your business and into the condition in which it can be sold.

Consider getting our
basic accounting e-book, which discusses this topic in more detail (and contains many lessons not available on this site).

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