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Post Info TOPIC: How to account for outward carriage paid by customer


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How to account for outward carriage paid by customer


Hope you are all keeping well ;)

I have a question with regards to outward carriage. Let's use an example: The shops sells goods for £100.00. There is a freight/delivery company that picks these goods up and brings them to the customer. The shop pays £20.00 for this service. In this case, we Debit Carriage expense account and Credit Bank. But what do we do if the customer pays us this money or part of it back? So the invoice to customer shows £100.00 for products (excl. VAT) and £20.00 for delivery. Can we create a Sales account for outward carriage? If so, I think 20% VAT should be paid on this as it is sale? (Thus the total value of the invoice to the customer would be £144?) I am not sure if this is a correct procedure?†

Thank you!!!



Master Book-keeper

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Posts: 3711

I would agree that VAT is payable on the carriage, although I see a lot of invoices where the VAT is added first then carriage, making your example £140.00



†Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.

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