Difference between Carriage Inwards and Carriage Outwards:
Carriage Inwards – Definition and Explanation:
Carriage inwards is an expense incurred to bring the goods purchased to business premises or to a location as required by the business. Many goods are bought with carriage paid; carriage costs are therefore included in purchase price. Sometimes carriage inwards appears as a separate item on the purchase invoice or carriage is paid to a party other than the supplier, then a separate account is opened for carriage inwards. In that case this is shown in the trading section of income statement separately as a part of purchase cost since it is an unavoidable change if the business is to have goods available for sale.
Carriage Outwards – Definition and Explanation:
Carriage outwards is an expense incurred to deliver the goods sold to customers’ desired location. This is shown as an expense after gross profit in the income statement.
These carriage costs are shown in the income statement as follows:
Gross profit is the difference between revenue from sales and cost of making these goods sale able. This cost will include the cost of purchasing the goods, any carriage inwards, and any other costs necessary to make the goods fit for sales. It does not include the cost of selling the goods, so it never contains selling expenses or carriage outwards.