Methods for preparation of container accounts

Under this method two accounts are prepared namely, container stock account and container suspense account

i. Container stock account

This is an account used to records all the transaction relating to containers owned by the business. It contains the columns for quantity and value. This account is debited with the value of stock brought forward, purchases of additional containers and repairs and maintenance. It is credited with damaged, scrapped and retained stock.

Hire charges and closing stock are also credited in this account. The difference in this account represents either profit or loss on containers. Therefore, using the container suspense method, container stock account is prepared to control the stock movement of containers and to ascertain the profit or loss on containers.

DR — Format of the Container Stock Account — CR

Date	Details	Qty.	Rate	TZS	Date	Details	Qty.	Rate	TZS
	Balance b/d	xx	VR	xx		Container suspense: (retained containers)		RR	xx
	Premises	xx	VR	xx		Container suspense: (hiring charges)			xx
	Customers	xx	PR	xx		Bank: (Sale of scrap)		SP	xx
	Bank: (Purchases)	xx		xx		Destroyed/damaged			xx
	Bank: (Repairs)			xx		Balance c/d	xx	VR	xx
	Profit on sale of containers: (Income statement)			xx		Customers	xx	VR	xx
Total					Total
		xxx		xxx			xxx		xxx

ii. Container suspense account

is a temporary account used to record and monitor all transactions related to returnable containers in the business until they are fully settled or adjusted.

DR — Format of the Container Suspense Account — CR

Date	Details	Qty.	Rate	TZS	Date	Details	Qty.	Rate	TZS
	Bank/Debtor: (returned containers)	xx	RR	xx		Balance b/d		RR	xx
	Container stock: (retained containers)	xx	RR	xx		Bank/Debtor: (Containers sent out)	xx	CR	xx
	Container stock: (Hiring charges)			xx
	Balance c/d	xx	RR	xx
Total					Total
		xxx		xxx			xxx		xxx

Example

The Liganga Company Ltd. supplies gas in containers which are returnable after use. The containers cost TZS 40,000 each and are charged out to customers on sale or return within six months at TZS 52,000 each. Provided they are returned within six months period they are credited at TZS 46,000 each. At the end of the year, Liganga Company Ltd. values all returnable containers in customers' hands and in the company premises at TZS 32,000 each. The following details are also provided:

Container Stocks	At the Beginning of Year 2019	At the End of Year 2019
Containers in the Company Premises	1,380	1,572
Returnable Containers Held by Customers	2,395	1,455

During the year 2019, 1,550 new containers were purchased, 10,310 were invoiced to customers and 8,980 were returned. On inspection 260 containers requires repair costing TZS 325,000 and 28 containers were heavily destroyed, that, they had to be sold as scrap for TZS 60,000.

Required:

Use container suspense method to prepare:

a) Containers stock account; and b) Containers suspense account.

SOLUTION

Unlike in the container suspense method where profit or loss on containers is recognised in the containers stock account, under container trading method a trading account is prepared for this purpose. Two accounts are prepared, namely:

Container stock account:

The accounting entries in this account are almost similar to the treatments made using container suspense method, except that, the hiring charge and profit or loss on containers will not be shown in this account.

Container trading account:

This account replaces the container suspense account prepared using container suspense method. The account entries in this account include balance of containers in hands of customers at the beginning and end of the accounting period, containers sent to customers, containers returned and retained by customers. The difference between debit and credit totals represents either profit or loss on dealing with containers. Another important point to note here is that, retained containers are valued at valuation rate, instead of returnable rate treated under suspense method.

Example

The Liganga Company Ltd. supplies gas in containers which are returnable after use. The containers cost TZS 40,000 each and are charged out to customers on sale or return within six months at TZS 52,000 each. Provided they are returned within six months period they are credited at TZS 46,000 each. At the end of the year, Liganga Company Ltd. values all returnable containers in customers' hands and in the company premises at TZS 32,000 each. The following details are also provided:

Container Stocks	At the Beginning of Year 2019	At the End of Year 2019
Containers in the Company Premises	1,380	1,572
Returnable Containers Held by Customers	2,395	1,455

During the year 2019, 1,550 new containers were purchased, 10,310 were invoiced to customers and 8,980 were returned. On inspection 260 containers requires repair costing TZS 325,000 and 28 containers were heavily destroyed, that, they had to be sold as scrap for TZS 60,000.

prepare the following accounts using container trading method:

1. Container stock account; and
2. Container trading account

Dr. Containers Stock Account Cr.

Date	Details	Qty ('000)	Rate (TZS '000)	TZS ('000)
2018 1st Jan.	Balance b/d	-	-	-
2018	Premises	1,380	32	44,160
2018	Customers	2,395	32	76,640
2018	Bank (purchases)	1,550	40	62,000
2018	Bank (Repair on containers)	-	-	-
2018	Net profit	-	-	80,079
2018 31st Dec.	Bank (sale of scrap)	28	46	104,420
2018 31st Dec.	Container suspense (Retained containers)	2,270	32	61,860
2018 31st Dec.	Container suspense (hiring charge)	-	-	-
2018 31st Dec.	Balance c/d	1,572	46	50,304
2018 31st Dec.	Balance c/d	1,455	32	46,560
2019 1st Jan.	Balance b/d	1,572	46	50,304
2019 1st Jan.	Balance b/d	1,455	32	46,560
2019	Debtors (Returned containers)	8,980	46	413,080
2019	Container stock: (Retained containers)	2,270	32	104,420
2019	Container stock: (hiring charge)	-	-	-
2019	Balance c/d	1,455	46	66,930

Dr. Containers Suspense Account Cr.

Date	Details	Qty ('000)	Rate (TZS '000)	TZS ('000)
2019	Debtors (Returned containers)	8,980	46	413,080
2019	Container stock: (Retained containers)	2,270	32	104,420
2019	Container stock: (hiring charge)	-	-	-
2019	Balance c/d	1,455	46	66,930
2019 1st Jan.	Balance b/d	2,395	46	110,170
2020 1st Jan.	Balance b/d	10,310	46	536,120
2020 1st Jan.	Balance b/d	12,705	52	646,290

Under this method a container stock account is prepared recording all transactions at valuation rate, except for bought containers which are recorded at purchase rate. The main purpose of this account under depreciation method is to determine the amount of depreciation on containers. The hiring charge, losses on scraped containers, and profit or loss on dealing with containers will not feature in this account, instead, a profit and loss account is prepared for the purpose.

The accounts to be prepared under this method are:

1. Container stock account;
2. Container suspense account; and
3. Profit or loss

The container suspense account is opened in similar way as it was prepared under the container suspense method, except that the hiring charges will not be determined, instead it will be calculated and credited in the profit or loss account, together with the profit on retained containers.

The profit or loss account is opened for the purpose of determining the profit on dealing with containers. The account will be credited by the hire charge and profit on retained containers. The depreciation amount identified in the container stock account will be debited in the profit or loss account, together with repair expenses, loss on damaged containers and loss on sale of scraped containers.

Example

The Liganga Company Ltd. supplies gas in containers which are returnable after use. The containers cost TZS 40,000 each and are charged out to customers on sale or return within six months at TZS 52,000 each. Provided they are returned within six months period they are credited at TZS 46,000 each. At the end of the year, Liganga Company Ltd. values all returnable containers in customers' hands and in the company premises at TZS 32,000 each. The following details are also provided:

Container Stocks	At the Beginning of Year 2019	At the End of Year 2019
Containers in the Company Premises	1,380	1,572
Returnable Containers Held by Customers	2,395	1,455

During the year 2019, 1,550 new containers were purchased, 10,310 were invoiced to customers and 8,980 were returned. On inspection 260 containers requires repair costing TZS 325,000 and 28 containers were heavily destroyed, that, they had to be sold as scrap for TZS 60,000.

prepare the following accounts using container depreciation method:

1. Container stock account;
2. Container suspense account; and
3. Container profit or loss account

Dr — Container Stock Account — Cr

| Date | Details | Qty (Units) | Rate (TZS '000) | Amount (TZS '000) | Details | Qty (Units) | Rate (TZS '000) | Amount (TZS '000) | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 2018-01-01 | Balance b/d (Premises) | 1,380 | 32 | 44,160 | 2018-12-31 | Balance c/d (Premises) | 1,572 | 50,304 | | 2018-01-01 | Balance b/d (Customers) | 2,395 | 32 | 76,640 | 2018-12-31 | Balance c/d (Customers) | 1,455 | 46,560 | | 2018-01-01 | Bank (Purchases) | 1,550 | 40 | 62,000 | 2018-12-31 | Suspense Account (Retained Containers) | 1,572 | 50,304 | | 2018-12-31 | Bank (Sale of Scrap) | 28 | 32 | 2,270 | 2018-12-31 | Depreciation (Profit or Loss A/C) | 0 | 0 | | 2018-12-31 | Suspense Account (Retained Containers) | 1,572 | 32 | 50,304 | | | | | | 2019-01-01 | Balance b/d (Premises) | 1,572 | 32 | 50,304 | | | | | | 2019-01-01 | Balance b/d (Customers) | 1,455 | 32 | 46,560 | | | | | | Total | 5,325 | | | 182,800 | Total | 5,325 | | 182,800 |

Dr — Containers Suspense Account — Cr

| Date | Details | Qty (Units) | Rate (TZS '000) | Amount (TZS '000) | Details | Qty (Units) | Rate (TZS '000) | Amount (TZS '000) | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 2019-12-31 | Debtors (Returned Containers) | 8,980 | 46 | 413,080 | 2019-12-31 | Container Stock (Retained Containers) | 2,270 | 104,420 | | 2019-12-31 | Balance c/d (Returned Containers) | 1,455 | 46 | 66,930 | 2019-01-01 | Balance b/d (Container with Customers) | 2,395 | 46 | | 2020-01-01 | Balance b/d (Containers Sent Out) | 10,310 | 46 | 474,260 | 2020-01-01 | Debtors (Containers Sent Out) | 12,705 | 584,430 | | Total | 33,825 | | | 1,541,100 | Total | 33,825 | | 1,541,100 |

Dr — Profit or Loss Account — Cr

Details	Amount (TZS)	Details	Amount (TZS)
Depreciation	13,236	Hiring Profit (52 - 46) × 10,310	61,860
Repairs on Containers	325	Retained Profit (46 - 32) × 2,270	31,780
Net Profit on Containers	80,079	Net Profit	93,640
Total	93,640	Total	93,640