Carriage inwards and outwards
Carriage inwards is transport cost on purchases and is added to the cost of inventory; carriage outwards is transport cost on sales to customers and is a selling expense.
See it move
Buying goods for €8,000 and paying €400 to bring them to the warehouse adds carriage inwards to inventory cost, giving €8,400. Selling that inventory for €15,000 gives gross profit of €6,600. Delivering to customers then costs €250 of carriage outwards, a selling expense deducted after gross profit, leaving €6,350.
The formula
Variables
- Cost of purchases (€)
- Invoice price of purchases (€)
- Carriage inwards (€)
Carriage inwards is added to the cost of purchases; carriage outwards is excluded and expensed separately instead.
Check yourself
A business buys goods costing €12,000 and pays €600 to transport them to its own warehouse (carriage inwards). It separately pays €350 to deliver goods to a customer (carriage outwards). What is the cost of purchases figure used in calculating cost of goods sold?