On Which Basis The Carriage Inward is Allocated?

By BYJU'S Exam Prep

Updated on: September 13th, 2023

Administrative costs include the costs of paying wages and salaries as well as benefits to non-sales personnel. They are one of the three categories of operating expenses that make up a company’s overall costs. The other two are related to selling and general expenses. Since salaries and wages are included in administrative fees and are paid based on the amount of time and service an employee provides in a department, these costs are allocated based on the number of time employees spend in each department. Depending on how much time employees spend in each area, administrative costs are divided among the several departments.

The carriage inward is assigned in departmental accounting based on the Purchase department. When items are purchased and shipped to the company, a shipping fee is charged called “carrying inward and freight.” One instance of carriage inward is the corporation’s supply with raw materials from its suppliers.

Allocations of Expenses


Basis of Allocations

Rates, Rents, Maintenance and Repairs, Insurance Building, Taxes

If provided, the amount of floor space each department occupies; if not, on a timely basis.

Carriage Inward

Purchases of each department.

Insurance, Repair, and Maintenance of Capital Assets, Depreciation

Value of each department’s assets on an otherwise timely basis.

Labour Welfare Expenses

Employee number for each department.

PF/ESI Contribution

Salary and wages for every department.


On Which Basis The Carriage Inward is Allocated?

When a buyer orders goods with the phrase FOB shipping point, carriage inwards refers to the transportation fees that must be paid by the buyer when it receives the goods. Transportation-in or freight-in are other terms for carriage inwards. The cost of the acquired items includes the cost of internal transportation. As a result, the cost of the goods offered, the price of inventory, and the cost of the goods sold will all include the carriage of inventory items into the warehouse. If the cost is negligible, it can be deducted as it is incurred. Depending on the company’s accounting method, the carriage Inwards may be included in the Cost of Goods Sold in the Income Statement or the Balance Sheet as an asset. 

Carriage inward and freight can be allocated based on the Purchase department in departmental accounting. Carrying inward and freight is the shipping fee charged when things are ordered and delivered to the business. The corporation’s supply of raw materials from its suppliers is one example of transportation inward.

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