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Module - 3

Accounting for Packages and


Containers
By.,
Yathiraju. K

The word containers may be substituted for


drums, boxes, packages, cases, crates, bottles,
barrels, empties and cask in different and
appropriate situation.

The modern business can not be separated with


containers.

Products need suitable containers before they


are sold to the customers.

Normally, there are two types of containers viz. primary which is


the part of the product and secondary which is needed for
distribution of goods to the customers.

When the containers are of primary nature its cost is included in


the cost of production and there is no need to be returned by the
customers. Therefore, no separate treatment is needed for such
containers.

But when the cost of the container is a significant portion of total cost, the
charge of container is normally excluded in the price of product to allow the
seller to compete with other competitors.

The usual practice for such containers is that they are returnable in nature
and are return by the customers with terms and conditions, a major portion of
charge already taken from the customers, will be refunded to the customers.

Therefore, the difference between the charged out price for containers and the
refunded

price

is

known

as

'Hire

charges'.

Accounting Treatment
and Objective
The accounting treatments of containers will be depend upon the
policy of the individual concern.
Accounting for packages or containers is done to achieve the following
objectives;
1. To exercise control on movements of containers to ensure

that

containers are properly returned by customers and due credit is


given to them are charged separately.
2. To see that there is no misappropriation of containers.
3. To find

main

out profit or loss on containers separately from the

product when a separate charge is made for containers.

Terms Used In Containers Account


1. Cost Price
The purchasing price or the manufacturing cost of the containers is referred as cost
price.
2. Charged Out Price
A particular amount can be charged to the customers for the container, which is
known as charged out price.
3. Returnable Price
When a customer returns the returnable containers in good condition within a
stipulated time, he/she will be refunded a certain amount which can be termed as
returnable or refundable price.
4. Hire Charge
The difference between charged out price and returnable price is known as hire
charge. Hire Charge = Charged out price - Returnable price
5. Containers Retained (Sold)
The containers are sent to the customers with terms and conditions. If the customer
fails to return the containers within the stipulated time, it will be treated as sold or
retained by customers.
6. Returnable Containers
The containers lying with the customers on the closing date of the accounting period
is known as returnable containers. For becoming returnable containers, the time
limit to return such containers is not been expired on the closing date.

Accounting Treatment of Containers


For accounting purpose, the containers can be divided
into two types:
(a) Non-returnable containers and
(b) Returnable containers.
a) Non-returnable Containers
The accounting for non-returnable containers can be
exercised under the following two conditions:
i. When separate charge is not made
ii. When separate charge is made

i. When a separate charge is not


made

The containers like tube of tooth paste, wrapper of chocolate, lubricants are

not returnable in nature. Therefore, the manufacturer or seller includes


the cost of such containers in the selling price of the goods.
In this case, a container stock account is opened debiting opening stock of

empties, purchases and credited with closing stock.


The difference between the debit total of container stock account with the

credit total is the cost of containers consumed.


The cost of containers consumed could be transferred to profit and

loss account as distribution expenses or charged to trading or


manufacturing account.

CONTAINERS STOCK ACCOUNT


(when containers are not returnable and
no separate charge is made)
Particulars
To Balance B/d
To Cash/Bank A/c
(Purchases )
To Cash/Bank A/c
(Repairs)

Amt

Particulars
By Cash/Bank A/c
(Scrap sold)
By Profit & loss A/c
(Depreciation)
By Profit & loss A/c
(Repairs)
By Trading
manufacturing a/c
By Balance C/d (closing
stock of containers at
cost)

Amt

Prepare containers stock accounts from information


Opening stock 20,000
Purchases 1,90,000
Sale of containers scrapped 5,000
Cost of container lost due to fire 6,000
Containers in hand 25,000

Prepare containers stock accounts from information


opening stock 20000
purchases 190000
sale of containers scrapped -5000
cost of container lost due to fire -6000
containers in hand - 25000
Particulars
To Balance b/d
To Purchases

Amt

Particulars

20000 By Bank
190000 By Profit & loss a/c
By Trading
manufacturing a/c
By Balancing
210000

Amt
5000
6000
174000

25000
210000

When separate charge is made


When separate charge is made
The charge for the containers in this case will

be included in the sale price of the goods. A


containers stock account should be kept
which will be debited with opening stock of
containers and purchases and credited with
closing stock, the balance being the
expenses of containers during the period of
the accounts is written off as distribution
expense to the profit and loss account

CONTAINERS STOCK ACCOUNT


(when containers are not returnable and separate charge is
made)

CONTAINERS STOCK ACCOUNT


(when containers are not returnable and separate
charge is made)
Particulars

Amount

Particulars

To balance b/d

By bank

To purchases

By profit & loss


a/c

To profit & loss


a/c

By customer
a/c (charge at
containers
more than cost
)
By balance c/d
closing stock
of containers at
cost)

Amount

QUESTION -Prepare containers stock accounts from


information
opening stock 55000
purchases 320000
sale of containers scrapped -12000
cost of container lost due to fire -10000
containers in hard 60000
charged on customer -315000

Prepare containers stock accounts from information


opening stock 55000
purchases 320000
sale of containers scrapped -12000
cost of container lost due to fire -10000
containers in hand 60000
charged on customer -315000

Particular

Amounts

Particular

Amounts

To balance b/d

55000

By bank

12000

To purchases

320000

By profit & loss


a/c

10000

To profit & loss

22000

By customers
a/c

315000

By balancing

60000

397000

397000

Containers returnable

When a separate charge is not


made
The double entry book keeping will
be similar to that
Except that opening and closing stock
will be divided between containers in
the warehouse and those in the hand
of the customers stock must be
brought into the accounts in cost less
adequate depreciation

Particular
1 for purchase of containers by the firm
Containers stock accounts
Dr
To cash account
2 When goods are sold in containers
customers account
Dr
To sales accounts
3 When goods are returned
sales return accounts
Dr
To customers account
4 When containers are repaired
Containers stock accounts
Dr
To cash account
5 container lost due to fire
profit and loss account
Dr
To Containers stock
accounts
6 Depreciation on containers

Amounts

amounts

When a separate charge is


made
Container or package is anything in which
product is packed for sale. It may be a
packet, bottle tube drum cylinder jar or any
other item. Packet or container may be of
two type , viz.. primary or secondary. The
former related to those packages which
forms type of products. The cost of such
containers is included in the cost of the
product. The other type related to those
containers which are required for distribution
of goods to the customers. Such types of
containers are usually Returnable to the
seller within a stipulated period of time by
the buyer.

Following journal entries are passed

Particular
1 for purchase of containers by the firm
Containers trading accounts
Dr
To cash account
2

When goods are sold in containers


customers account
Dr
To containers trading
accounts

3 When goods are returned


sales return accounts
Dr
To customers account
4

When containers are repaired


Containers trading accounts
Dr
To cash account

5 container lost due to fire


profit and loss account
Dr
To Containers trading
accounts

Amount
s

amounts