What is the Journal Entry for Carriage Inward?

by Badawi
(Malaysia)

Q: What is the journal entry for carriage inward?


A:
Remember, carriage simply means transportation costs and carriage inward (or inwards) is the cost of transporting goods into your business.

In other words, you are paying for goods to be shipped or delivered to you from your supplier.

Carriage inward is recognized as an
expense.

Here is the journal entry we would do to record carriage inward:

Dr Carriage Inward
(expense)
Cr Bank or Accounts Payable

Note that the Carriage Inward expense actually becomes part of the cost of the inventory (goods) that you purchase.

One would thus do a journal entry to transfer the carriage inward expense to either the
Purchases account (for the periodic inventory system) or Inventory account (for the perpetual inventory system):

Dr Purchases or Inventory
Cr Carriage Inward
(expense)

Eventually carriage inward, which is part of the purchases or inventory account, becomes part of the final Cost of Goods Sold figure in the income statement.

Note that carriage inward is also referred to as
Freight on Purchases or Freight In.

Best,
Michael Celender
Founder of Accounting Basics for Students


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