Carriage Outward Journal Entry

Carriage outward is the transfer of goods from company warehouse to the customers’ destination. Base on the sale and purchase agreement, supplier is mostly responsible for the delivery from the factory to the customers’ location.

Delivery refers to transporting your belongings from one location to another- whether across town or country. There are two ways that this can happen: Inward Carriage and Outward Carriage. Inward Carriage is when items go into storage at a warehouse, while Outward Carriage is when they leave storage for delivery at their destination.

The delivery fees may vary due to the sale term condition. In order to encourage the purchase, suppliers may provide free delivery service to the customers. The supplier will responsible for the delivery cost, so they record the cost into the income statement.

Some companies may charge an additional fee to the customers in exchange for the delivery fee. They include the fee in the invoice bill to customers. The customer has the option to use the supplier service or do it by themselves.

The destination of customers is different depending on the sale and purchase agreement. It can be the customers’ warehouse, customer’s port, suppliers’ port, and so on. Both buyer and seller must agree on the destination. The destination is the place that risk and rewards are transferred from the supplier to customer.

Carriage outward is the expense that company presents on income statement as the operating expense. Some companies present as the sale and marketing expense. The company needs to record expenses based on the accrued basic and match with the sale revenue.

Carriage Outward Journal Entry

Carriage outward is the expense that suppliers spend to deliver the goods to the customers. Company needs to record as expense and present on income statement.

The carriage outward is the expense that company paid to deliver goods to customer. Cash will decrease from balance sheet. If the company has not yet paid, we need to record the accounts payable.

Carriage Outward Journal Entry Example

Company ABC manufacturing a tire and sell them to car company. During the month, they receive a purchase order from a major customer overseas. The customers require the company to deliver the goods to the warehouse.

As the customer purchases a large number of goods, the company agree to deliver to their warehouse and is responsible for all the related cost.

At the month-end, production is completed and goods are delivered to customer’s warehouse. The transportation cost is $ 10,000 based on the invoice bill from a delivery company that ABC hire to deliver goods to the customer.

Please prepare a journal entry for carriage outward.

ABC hires the delivery company to handle the goods to customers. The journal entry is debiting carriage outward expense $ 10,000 and credit accounts payable.

Carriage outward is the operating expense present on the income statement. Accounts payable is the current obligation that company needs to pay to the delivery company.