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Raw materials transport costs - Essay Example

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College
Essay
Finance & Accounting
Pages 4 (1004 words)

Summary

Carriage inwards are the costs that are incurred as a result of transporting raw materials into a firm,these costs should be added to the value of goods purchased,and this means that the cost of raw materials should include the value of the goods purchased plus the transportation costs incurred by the firm in transporting these raw materials…

Extract of sample
Raw materials transport costs

Carriage inwards are the costs that are incurred as a result of transporting raw materials into a firm, these costs should be added to the value of goods purchased, and this means that the cost of raw materials should include the value of the goods purchased plus the transportation costs incurred by the firm in transporting these raw materials. Carriage outward is the cost of transportation of final or finished goods to the customer; these costs are treated as expenses and therefore are recorded in the profit and loss account as an expense.Therefore from the above discussion on the cost of transportation which are carriage inward and outward it is evident that carriage inward which is the cost incurred in transporting raw materials into the firm should be included in the valuation of inventory and therefore require that they are added to the cost of raw materials, carriage outward which is the transportation of goods to the customer should be treated as an expense and therefore should not be included in the valuation of inventory.Work in progress is a term used to goods that are not yet finished goods, their value is included in the valuation of inventory, overhead costs are those costs that cannot be directly traced to a particular products example rent and security costs, these costs are assigned to the product using an appropriate method whereby their cost is assigned to cost objects
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