Accounting For Stock: Purchases Of Goods & Its Associated Costs (Part 3)

In Part 2, we have learned about the purchases account.

When an enterprise purchases goods from the suppliers, besides the cost charged by the suppliers, we have other types of costs which are also part of the cost of the purchases of goods /services.


Transportation costs. Other terms having the same meaning is freight inwards, carriage inwards or transport inwards

Insurance expenses

Custom duties

Taxation on purchases like VAT or GST

In term of double entry, we have the following:

Debit: Purchases-Carriage inwards $100

Debit: Purchases- Insurance $100

Debit: Purchases-Custom Duties $200

Debit: Purchases- VAT/GST $ 50

Credit : Bank $450

Being taking up other part of the costs of the purchases.

[These expenses will be shown in the Income Statement directly below the purchases account]

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