Packages and Containers

7/25/2019 Packages and Containers

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Accounting for Packages andContainers

By.,

Yathiraju. K

Module - 3Module - 3


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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.


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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.


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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'.


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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 movementsof 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 isno misappropriation of containers.

3.Tofind out profit or losson containers separately from the

main product when a separate charge is made for containers.


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Terms Used In Containers Account1. Cost Price

The purchasing price or the manufacturing cost of the containers is referred as costprice.

2. Charged Out PriceA particular amount can be charged to the customers for the container, which isknown as charged out price.

3. Returnable PriceWhen 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 asreturnable or refundable price.

4. Hire ChargeThe difference between charged out price and returnable price is known as hirecharge.Hire Charge = Charged out price - Returnable price

5. Containers Retained (Sold)The containers are sent to the customers with terms and conditions. If the customerfails to return the containers within the stipulated time, it will be treated as sold orretained by customers.

6. Returnable ContainersThe containers lying with the customers on the closing date of the accounting period

is known as returnable containers. For becoming returnable containers, the timelimit to return such containers is not been expired on the closing date.


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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


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.. When a separate charge is notWhen a separate charge is notmademade

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

not returnable in nature. Therefore, themanufacturer or seller includes

the cost of such containers in the selling priceof the goods.

In this case, a container stock account is opened debiting opening stock ofempties, 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.


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CONTAINERS STOCK ACCOUNT(when containers are not returnable and

no separate charge is made)

Particulars Amt Particulars Amt

To Balance B/d By Cash/Bank A/c

(Scrap sold)

To Cash/Bank A/c

(Purchases )

By Profit & loss A/c

(Depreciation)

To Cash/Bank A/c

(Repairs)

By Profit & loss A/c

(Repairs)

By Trading

manufacturing a/c

By Balance C/d (closing

stock of containers at

cost)


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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


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Prepare containers stock accounts from informationopening stock 20000

purchases 190000sale of containers scrapped -5000

cost of container lost due to fire -6000

containers in hand - 25000

Particulars Amt Particulars Amt

To Balance b/d 20000 By Bank 5000

To Purchases 190000 By Profit & loss a/c 6000

By Trading

manufacturing a/c

174000

By Balancing 25000

210000 210000


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When separate charge is madeWhen separate charge is made

When separate charge is made

The charge for the containers in this case willThe charge for the containers in this case will

be included in the sale price of the goods. Abe included in the sale price of the goods. A

containers stock account should be keptcontainers stock account should be keptwhich will be debited with opening stock ofwhich will be debited with opening stock of

containers and purchases and credited withcontainers and purchases and credited with

closing stock, the balance being theclosing stock, the balance being the

expenses of containers during the period ofexpenses of containers during the period ofthe accounts is written o as distributionthe accounts is written o as distribution

expense to the pro!t and loss accountexpense to the pro!t and loss account


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"#$TA%$&'( (T#") A""#*$T

+when containers are not returnable and separate charge ismade


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"#$TA%$&'( (T#") A""#*$T+when containers are not returnable and separate

charge is made

Particulars Amount Particulars AmountTo balance bd / bank

To purchases / pro!t 0 lossac

To pro!t 0 lossac

/ customerac +charge atcontainersmore than cost

/ balance cdclosing stockof containers atcost


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1*&(T%#$ -2repare containers stock accounts frominformation

opening stock 444purchases 354444

sale of containers scrapped -65444cost of container lost due to !re -64444

containers in hard 74444charged on customer -36444


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2repare containers stock accounts from informationopening stock 444purchases 354444

sale of containers scrapped -65444cost of container lost due to !re -64444

containers in hand 74444charged on customer -36444

Particular Amounts Particular Amounts

To balance bd 444 / bank 65444

To purchases 354444 / pro!t 0 lossac

64444

To pro!t 0 loss 55444 / customersac 36444

/ balancing 74444

389444 389444


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"ontainers returnable


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When a separate charge is notWhen a separate charge is not

mademade

The double entr/ book keeping willbe similar to that

&xcept that opening and closing stockwill be di:ided between containers inthe warehouse and those in the handof the customers stock must be

brought into the accounts in cost lessade;uate depreciation

Particular Amounts amounts


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Particular Amounts amounts

6 for purchase of containers b/ the !rm"ontainers stock accounts


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When a separate charge isWhen a separate charge is

mademade "ontainer or package is an/thing in which"ontainer or package is an/thing in which

product is packed for sale. %t ma/ be aproduct is packed for sale. %t ma/ be apacket, bottle tube drum c/linder >ar or an/packet, bottle tube drum c/linder >ar or an/other item. 2acket or container ma/ be ofother item. 2acket or container ma/ be of

two t/pe , :i?.. primar/ or secondar/. Thetwo t/pe , :i?.. primar/ or secondar/. Theformer related to those packages whichformer related to those packages whichforms t/pe of products. The cost of suchforms t/pe of products. The cost of suchcontainers is included in the cost of thecontainers is included in the cost of theproduct. The other t/pe related to thoseproduct. The other t/pe related to thosecontainers which are re;uired for distributioncontainers which are re;uired for distributionof goods to the customers. (uch t/pes ofof goods to the customers. (uch t/pes of

containers are usuall/ 'eturnable to thecontainers are usuall/ 'eturnable to theseller within a stipulated period of time b/seller within a stipulated period of time b/the bu/er.the bu/er.


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@ollowing >ournal entries are passed


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Particular Amounts

amounts

6 for purchase of containers b/ the !rm"ontainers trading accounts

Documents

Packages and Containers