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 made
ii. When separate charge is not made
i. When separate charge is made
A separate charge for container could be made even though the containers are non-returnable. To record such transaction, a container account is opened debiting opening stock of containers, purchases and credited with the amount charged to customers and closing stock of containers. The separate charge made to the customer is recorded in Sales Day Book in a separate column. Since the separate charge made to customers for the containers is higher than the cost of the containers, the container stock account will therefore, shows the profit or loss on the containers for the period.
ii. When no separate charge is 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. Hence, in this case, a container stock account is opened debiting opening 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.
b) Returnable Containers
When containers are returnable, there are two alternatives for accounting treatment:
i. When no separate charge is made
ii. When separate charge is made
i. When no separate charge is made
The packages, tins, boxes, bottles etc. are necessary for packaging goods. While selling such types of well packed goods, a provision could be made with the customers for the returns of such type of containers. The provision of repair and maintenance is also necessary to make the container moveable regularly. When no separate charge is made even for returnable container, it is being expected that the customer will return the container within a specified period. If the customer returns the containers on time his account will be credited with the value less than the original cost of the container. This is carried out for maintaining the provision of depreciation.
ii. When separate charge is made
When separate charge is made for returnable container, there are various methods to deal with the situation. But widely used methods are as follows:
1. With opening containers stock and trading account
- Containers stock account
- Containers trading and profit and loss account
- Containers reserve/suspense/deposit account
2. Without opening containers stock account separately
- Containers trading and profit and loss account
- Containers reserve/suspense/provision account
