Carriage inwards refers to the transportation costs associated with the purchase of merchandise or other assets. The buyer is responsible for the cost of carriage inwards when it buys items and the prices are stated as being FOB shipping point. Carriage inwards is also known as freight-in or transportation-in.

When goods or merchandise are purchased FOB shipping point and the periodic inventory method is used, the buyer will likely record the cost of the carriage inwards in the general ledger account Carriage Inwards (or Freight-in or Transportation-in). The carriage inwards costs are considered to be part of the cost of items purchased. In other words, part of the costs of carriage inwards should be assigned to the units in inventory and some should be assigned to the units that have been sold.

In the case of assets other than inventory items that are purchased FOB shipping point, the buyer should add the carriage inwards cost to the asset’s cost. This is necessary because accountants define an asset’s cost as all of the costs that are necessary to get an asset in place and ready for use.

Learn more about Inventory and Cost of Goods Sold.

One limitation of the balance sheet is that only the assets acquired in transactions can be included. Therefore, some of a company’s most valuable assets will not be reported on the balance sheet. For example, assume that a company developed an internet business that now attracts millions of visitors [...] Continue Reading…

One example of drop ship is a manufacturer shipping goods directly to one of its customers’ customer (instead of delivering the goods to the customer that placed the order with the manufacturer). The following illustrates the concept of drop ship, drop shipping or a drop shipment.

Assume that XYZ Distributors [...] Continue Reading…

In the case of a check payable to John Smith (the payee), a blank endorsement would be the signature of John Smith on the back side of the check without any other words above or below his signature.

A blank endorsement is considered to be risky because the endorser is [...] Continue Reading…

A blank check often refers to a check that has been signed by an authorized check signer before the other information (date, payee, amount) has been entered on the check. For instance, a small business owner may sign three blank checks before leaving for a seven day vacation. Basically [...] Continue Reading…

The aging method usually refers to the technique used for determining the credit balance needed in the account Allowance for Doubtful (or Uncollectible) Accounts. This Allowance account is a contra asset account connected with Accounts Receivable. Usually when a credit adjustment is entered into the Allowance account, a corresponding [...] Continue Reading…

A memorandum entry is a short message entered into the general journal and also entered into a general ledger account. It is not a complete journal entry because it does not contain debit and credit amounts.

An example of a memorandum entry might be the following:

“On May 1, 2013 a [...] Continue Reading…

Stepped cost refers to the behavior of the total cost of an activity at various levels of the activity. When a stepped cost is plotted on a graph (with the total cost represented by the y-axis and the quantity of the activity represented by the x-axis) the lines will [...] Continue Reading…

A few asset accounts intentionally have credit balances. For instance, the account Accumulated Depreciation (which is a plant asset account) will have a credit balance since it is credited for the amounts that are debited to Depreciation Expense. The account Allowance for Bad Debts will have a credit balance [...] Continue Reading…

Per annum means yearly or annually. For example, if a business charges its customers 1.5% per month on any unpaid balance, the per annum rate is 18%. The per annum rate was the result of 1.5% X 12 months in a year.

When a supplier offers a credit customer an [...] Continue Reading…