ACCOUNTANCY FORM 6 – 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.

1. Non returnable containers
   
2. Returnable container
   
3. NON – RETURNABLE CONTAINERS:-
   

   Like; cigarette packets
   

 

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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 nglish-swahili/distribution” target=”_blank”>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 disnglish-swahili/courage” target=”_blank”>courage 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

CONTAINER SUSPENSE A/C

It shows deposits returnable to customers.

It’s ruling – same as the container stock A/C.

JOURNAL ENTRIES / ACCOUNTING ENTRIES

1. 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.
   

2. Purchase of new containers for cash
   

 

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         Dr Container stock A/C

         Cr cash A/C

1. Sale of containers for cash
   

   Dr Cash A/C
   

   Cr container stock A/C
   

2. Repair charge for containers
   

   Dr Container stock A/C
   

   Cr cash A/C
   

3. 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 
   

4. For charge out price ( container sent/ charged / invoiced to customer)
   

   Dr. Container suspense A/C
   

   Cr. Container Debtors A/C     with charged out price
   

5. For credit bank price (containers returned by the customer to the supplier)
   

 

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         Dr Container suspense A/C

         Cr container debtors A/C       With credit back price

1. For containers retained by customers ( time expired)
   

 

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       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;-

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:-

1. Container stock A/C
   
2. Container suspense A/C
   

 

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If you are told to open balance sheet

                                       BALANCE SHEET

EXERCISE

1. 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.
   

 

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On 1^st 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 31^st Dec 1996 there was a deficiency of 900 containers.

On 31^st 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

1. Containers stock A/C
   
2. 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.
   

 

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The following are the items relating there in respect of the year ended 31^st 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:-    

1. Container stock A/C
   
2. Container suspense A/C
   

 

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SOLUTION   (1)

                    DR                             CONTAINER STOCK ACCOUNT                       CR

                  DR              CONTAINER SUSPENSE ACCOUNT                            CR

 SOLUTION (2)
DR             CONTAINER STOCK ACCOUNT               CR

                 DR                CONTAINER SUSPENSE              CR

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

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.