Glossary
Carriage inwards
The cost of having purchased goods delivered to the business.
What it means
The delivery cost of bringing in purchases; added to the cost of purchases.
Example
Paying RM120 to have stock delivered is carriage inwards.
Why it matters
It is included in cost of sales, so it affects gross profit.
In practice
Carriage inwards is part of the cost of buying goods. It appears in the trading section of the income statement and is added to purchases when working out cost of sales. Any cost of getting goods into a saleable condition and location forms part of their cost. In the ledger it has a debit balance in its own account.
Suppose a business buys stock for RM5,000 and pays RM200 to have it delivered to the shop. The adjusted purchases figure is RM5,200. This feeds into cost of sales and reduces gross profit.
Students often confuse carriage inwards with carriage outwards. Carriage inwards is the cost of goods coming in from suppliers, and it belongs in the trading section. Carriage outwards is the cost of goods going out to customers, and it belongs among the ordinary expenses lower down. A simple test is to ask whether the delivery brings stock to the business or takes finished goods away. Placing carriage inwards among expenses leaves gross profit overstated.
If you misplace delivery costs in the income statement, one of our teachers can check where each item belongs with you. Book a trial class.
Related terms
Definitions here are general accounting explanations for study. For your board's exact wording, see its official syllabus via Sources.
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