TOPIC 3: CONTAINER ACCOUNTS
CONTAINER ACCOUNTS
What is a container?
Container is anything in which goods are contained.
Container is used in parking goods. Examples are the cigarette packets, bottles, crates, gas cylinder etc.
Types of containers.
- Non returnable containers
- Returnable container
- NON – RETURNABLE CONTAINERS:-
Like; cigarette packets
These are the containers which no charge is made to customers. They are usually disposed off by the customer at will. Usually the containers for such items as cigarette, foods are an integral part of the goods sold. Therefore the cost for the containers should be taken to the manufacturing A/C as it is part of the factory/pan cost. But if the containers and the contents are regarded as distinct items the cost of such containers is a distribution expenses and so taken to a profit and loss A/C.
2. RETURNABLE CONTAINERS:
Example: gas cylinder
These are the containers which a customer is required to return to its container and a refund being made once the container is return to the supplier within time stipulated and in a good condition.
Deposit is charged to the customer, the customer may with hold the container after use.
The deposit should be enough to discourage the customer from, with holding the container but it should not be too much to make goods unaffordable.
Deposit = charge out price
Refund = credit back price
Usually the customer is refunded with an amount less than that given by him as deposit. The difference is called Hiring charge.
Hiring charge = charge out price – credit back price.
ACCOUNTING PART.
In the supplier’s books two accounts can be opened, these are the container stock A/C and container suspense A/C.
CONTAINER STOCK A/C
It shows the movement of contained owned by the supplier to and from the warehouse.
It can also be used in determining a profit / loss on container. Usually a valuation of stocks. Both at the supplier’s premises and those held by customers (time not expired) are made. Both stocks at the start and end of a period are shown in this account.
DR CONTAINER STOCK ACCOUNT CR
| DETAILS | QTY | RATE | AMOUNT | DETAILS | QTY | RATE | AMOUNT |
CONTAINER SUSPENSE A/C
It shows deposits returnable to customers.
It’s ruling – same as the container stock A/C.
JOURNAL ENTRIES / ACCOUNTING ENTRIES
- For the stocks (both open and close) of containers in the customers hands + at the supplier’s Premises.
For opening stocks – debited to the container stock A/C as balance b/d
For closing stock – Credited to the container stock A/C as balance c/d
The valuation figure is in use.
- Purchase of new containers for cash
Dr Container stock A/C
Cr cash A/C
- Sale of containers for cash
Dr Cash A/C
Cr container stock A/C
- Repair charge for containers
Dr Container stock A/C
Cr cash A/C
- For opening and closing deposit returnable stock with customer.
For opening stock – credited to the container suspense A/C as b/d.
For closing stock – debited to the container suspense as c/d
- For charge out price ( container sent/ charged / invoiced to customer)
Dr. Container suspense A/C
Cr. Container Debtors A/C with charged out price
- For credit bank price (containers returned by the customer to the supplier)
Dr Container suspense A/C
Cr container debtors A/C With credit back price
- For containers retained by customers ( time expired)
Dr Container suspense A/C
Cr container stock A/C with credit back price
For hiring charge i.e. charge out price > credit back price
Dr Container suspense A/C
Cr container stock A/C
N.B :-
After all the appropriate entries have been made in container A/C the balance. Figure represent the profit or loss of container uses.
Example
Kimburumatari supplies gas in expensive containers which are returnable. These containers cost Tshs 20 each and are charged out to customers at Tshs 30. Provided they are returned within six months, they are credited at Tshs 25 each. At the end of the year the company valued all returnable in containers customers hands and customers held on stock at Tshs 15 each.
You are provided;-
| Beginning of the year | End of the year | |
| container held by company | 2760 | 3144 |
| Returnable container | 4760 |
During the year some containers were purchased, 20,620 were invoiced to customers and 17,980 were returned, 1,000 containers were held by the customers beyond the time stipulated. On inspection 260 containers were repaired costing Tshs 325,56 containers had to be sold as scrap for Tshs 600, 400 containers were lost in container dealers premises.
Required:-
- Container stock A/C
- Container suspense A/C
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DR CONTAINER STOCK ACCOUNT CR
DR CONTAINER SUSPENSE ACCOUNT CR |
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If you are told to open balance sheet
BALANCE SHEET
| CURRENT LIABILITIES | CURRENT ASSETS | ||
| Deposit returnable | 160,750 | Stocks – at prem. | 47160 |
| Customers | 96450 |
EXERCISE
- Daramu ltd sell their products in containers which cost Tshs 50 each. They are charge out to customers at Tshs 100 and credited at Tshs 75 each if returned in good condition within three month. At the year end all containers owned by the company, whether within the factory or in the customers hands are valued at Tshs 25 each for accounting purposes.
On 1st January 1996 the company owned 24,000 containers in the factory and 30,000 containers which had been in the hands of customers for less than three months.
During 1996, 20,000 containers were purchased, 60,000 were returned within the prescribed period and 2,000 were receipt by customers over the three months limit 800 containers were sold for shs 20 each during the year, 300 were scrapped, and when the stock was taken on 31st Dec 1996 there was a deficiency of 900 containers.
On 31st 1996 the company owner 38,000 container in the factory and 32,000 containers which had been in the hands of customers for less than the three months.
Required
To prepare for the year 1996
- Containers stock A/C
- Containers suspense A/C
2 .A firm carrying on business as pottery manufactures market their own packing cases, which are charged to customers at 100 percent over cost, but are returnable, full credit being give.
The following are the items relating there in respect of the year ended 31st Dec 1999:-
Tshs
Stock of cases, 1-1-1999 596
Case in hand of customers as per ledger
Balances (1-1-1999) 840
Cases charged to customers 3140
Materials used 38
Wages paid for marking and repairing cases 156
Cases returned by the customers 3260
Cases paid for by customers (retained) 140
Stock of case in factory (31-12-1999) 280
The cases in the hands of customers were valued at cost less 20%.
Required:-
- Container stock A/C
- Container suspense A/C
SOLUTION (1)
DR CONTAINER STOCK ACCOUNT CR
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DR CONTAINER SUSPENSE ACCOUNT CR
| DETAILS | QTY | RATE | AMOUNT | DETAILS | QTY | RATE | AMOUNT |
| Returned | 60,000 | 75 | 4,500,000 | deposit returnable b/d | 30,000 | 75 | 2,250,000 |
| Retained | 2000 | 75 | 150,000 | charge out | 64,000 | 100 | 6,400,000 |
| hiring charge | 1,600,000 | ||||||
| Deposit returnable c/d | 32,000 | 75 | 2,400,000 | ||||
| 94,000 | – | 8,650,000 | 94,000 | – | 8,650,000 | ||
| Deposit returnable b/d | 32,000 | 75 | 2,400,000 |
SOLUTION (2)
DR CONTAINER STOCK ACCOUNT CR
| DETAILS | AMOUNT | DETAILS | AMOUNT |
| Balance b/d -premises | 596 | Retained cases | 140 |
| customers | 336 | ||
| material used | 38 | loss on container | 474 |
| Repairs | 156 | Balance c/d: premises | 280 |
| Customer | 232 | ||
| 1126 | 1126 |
DR CONTAINER SUSPENSE CR
| DETAILS | AMOUNT | DETAILS | AMOUNT |
| Returned | 3260 | Balance b/d | 840 |
| Retained | 140 | Charged to customers | 3140 |
| hiring charge | 580 | ||
| 3980 | 3980 |
Valuations:
Opening stock with customers. Cost – 100 x cost
= 840 – ½ x840 = 420
= cost – x cost = 420 x 420 = 336
= closing stock = 580 – ½ x 580 = 290
= 290 – 20/100 x 290 = 237
STATEMENT OF PROFIT OR LOSS ON CONTAINER
| Hiring charge(charge out price -credit back price) x containers sent | xxx |
| Add; profit on containers retained;(credit back – valuation) | |
| No. of containers retained. | xxx |
| xxxx | |
| Deduct ; Depreciation of containers (cost of new container – valuation)X New container bought xx | |
| new container bought | |
| Repairs xx | |
| loss on container scrapped & sold ; sales – ( valuation of container) x (No. of container) xx | xxx |
| Profit on container | xxxx |
The use of containers trading A/C
In this case the container trading A/C will be used in determining a profit or loss on container.
The container stock A/C will then be used in deducing an amount for depreciation of containers.
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DR CONTAINER STOCK ACCOUNT CR |
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DR CONTAINER TRADING ACCOUNT CR
| DETAILS | QTY | RATE | AMOUNT | DETAILS | QTY | RATE | AMOUNT |
| Returned | xx | CR back price | xxx | opening deposit return | x | credit back price | xxx |
| Retained | xx | valuation | xxx | charged to customer | xxx | charge out .pr | xxx |
| Scrapped | x | valuation | xx | sale of container | |||
| Depreciation | xx | scrapped | x | Valuation | xx | ||
| Repairs | xx | ||||||
| Profit | x | ||||||
| credit | |||||||
| closing deposit | xx | back price | xxx | ||||
| xxxx | xxxx |
DR CONTAINER DEBTORS CR
| DETAILS | QTY | RATE | AMOUNT | DETAILS | QTY | RATE | AMOUNT |
| 1/1 Bal.b/d | x | xxx | Returned | CR back | xx | ||
| Receipt | xx | ||||||
| Trading to customer | xxx | Charge out price | xxx | Retained | xx | – | |
| 31/12 Bal.c/d | xx | xxx | |||||
| xxx | xxxx | xxx | xxxx | ||||
| Balance b/d | xx | xxxx |
EXERCISE
Pankraparcrimparcat co ltd sells oil in drums which are charged at Tshs 10 each. Customers returning drums within a month are credited with Tshs 7.
The following information is available from the books:
- Drums returnable on 1.1.999 4000
- Drums in stock as on 1.1.999 8000
- Drums purchased in 1999 at Tshs 5 each 30000
- Drums sent out in 1999 500000
- Drums returnable by customers 480,000
- Drums scrapped in 1999 (sold for 6000) 2000
- Drums sent out in Dec 1999 lying with customers 10000
- All drums at 31st Dec 1999 are to be valued at 50% of the cost price
- All drums as on 1.1.1999 were valued at Tshs 2/50 each
- Amount received from drum debtors as on 1.1.1999 was Tshs 1580000
Required:-
- Prepare the drums trading account and drums debtors A/c
- Prepare a statement of profit of loss on drums for the year ended 31st December 1999.
DR DRUMS STOCK ACCOUNT CR
| DETAILS | QTY | RATE | AMOUNT | DETAILS | QTY | RATE | AMOUNT |
| Bal.b/d -premises | 8000 | 2.5 | 20,000 | Drums Trading scrapped | 2000 | 2.5 | 5000 |
| with customers | 4000 | 2.5 | 10,000 | Retained | 14,000 | – | 45,000 |
| cash;purchases | 30000 | 5 | 150,000 | Depreciation | 65,000 | ||
| Bal,c/d – premises | 16,000 | 2.5 | 40,000 | ||||
| – customer | 10,000 | 2.5 | 25,000 | ||||
| 42,000 | 180,000 | 42,000 | 180,000 | ||||
| Balance b/d premises | 16,000 | 2.5 | 40,000 | ||||
| customer | 10,000 | 2.5 | 25,000 |
DR DRUMS DEBTORS ACCOUNT CR
| DETAILS | QTY | RATE | AMOUNT | DETAILS | QTY | RATE | AMOUNT |
| Drum D Returned | 480,000 | 7 | 3,336,000 | Bal.c/d | 4,000 | 7 | 28,000 |
| Drum stock scrapped | 2000 | 2.5 | 5000 | Drum debtor sent | 500,000 | 10 | 5,000,000 |
| Retained | 14,000 | 45,000 | cash sale of scrapped | 2000 | 6000 | ||
| Depreciation | 65,000 | ||||||
| Profit | 1,489,000 | ||||||
| 31/12 Bal.c/d | 10,000 | 7 | 70,000 | ||||
| 506,000 | 5,034,000 | 506,000 | 5,034,000 | ||||
FIFO method is used:
Valuation drum retained = 10000 @2.50 = 25000
4000@5 = 20000
45000
Statement to profit or loss
Hiring charge = (10 – 7) 500000 1500000
Add: profit on co. Retained = (7-2.50) 14000 63000
1563000
Deduct: depreciation = (5 -2.50) 30000 7500
Loss on sales = 6000 – (2.50 x 2000) 1000
Profit 1487000
EXERCISE
Madras chemicals ltd supply their products in returnable drums which are charged out at Tshs 20 each. Customers returning the drums within a month are credited with Tshs 18. The company’s procedure is to retain Tshs 18 in deposit account till the expiry of the option period for return of the drums.
The following particulars are available from the drums:-
Numbers
Returnable drums are as on 1.1.1991 8000
Drums in stock as on 1.1.1991 16000
Drums purchased during 1991 at shs 15 per drum 20000
Drums sent to customers during 1991 300000
Drums returned by customers in 1991 288000
Drums returnable on 31.12.1991 15000
Drums scrapped in 1991 sold for Tshs 10000 2000
All drums as on 31.12.90 and 31.12.91 are to be valued at Tshs 10 each. All the amounts due in respect of drums had been collected from the customers
You are asked to show the ledger a/c for 1991 for:-
- Drums stock.
- Drums debtors
- Drums trading a/c
DR DRUMS STOCK ACCOUNT CR
| DETAILS | QTY | RATE | AMOUNT | DETAILS | QTY | RATE | AMOUNT |
| Balance b/d -premises | 16,000 | 10 | 160,000 | scrapped | 2,000 | 10 | 20,000 |
| with customer | 8000 | 10 | 80,000 | Retained | 5000 | 10 | 50,000 |
| purchases | 20,000 | 15 | 300,000 | Depreciation | 100,000 | ||
| Balance c/d – premises | 22,000 | 10 | 220,000 | ||||
| customer | 15,000 | 10 | 150,000 | ||||
| 44,000 | 540,000 | 44,000 | 540,000 | ||||
| balance b/d -premises | 22,000 | 10 | 220,000 | ||||
| with customers | 15,000 | 10 | 150,000 |
DR DRUMS TRADING ACCOUNT CR
| QTY | RATE | AMOUNT | QTY | RATE | AMOUNT | ||
| Returned | 288,000 | 18 | 5,184,000 | Balance b/d | 8,000 | 18 | 144,000 |
| Scrapped drum stock | 2000 | 10 | 20,000 | Drum debtor sent | 300,000 | 20 | 6,000,000 |
| Retained | 5000 | 10 | 50,000 | sale on scrapped | 2000 | 10,000 | |
| Depreciation | 100,000 | ||||||
| profit | 530,000 | ||||||
| Balance c/d | 15,000 | 18 | 270,000 | ||||
| 310,000 | 6,154,000 | 310,000 | 6,154,000 |
DR DRUMS DEBTORS ACCOUNT CR
| DETAILS | QTY | RATE | AMOUNT | DETAILS | QTY | RATE | AMOUNT |
| Balance b/d | 8,000 | 80,000 | Returned | 288,000 | 18 | 5,184,000 | |
| Drum Tr | Retained | 5000 | |||||
| Drum Trading sent | 300,000 | 20 | 6,000,000 | ||||
| Balance c/d | 15,000 | 896,000 | |||||
| 308,000 | 6,080,000 | 308,000 | 6,080,000 | ||||
| Balance b/d | 15,000 | 896,000 |
Statement on profit:
Hiring charge = (20 – 18) 300000 600000
Add: purchase on retained = (18 – 10) 5000 40,000
640,000
Less: depreciation (15 – 10) 2000 100,000
Loss on sales = 10000 – (10 x 2000) 10,000
Profit 530,000
| READ TOPIC 4 |
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