Rates used in containers

a. Purchase rate (PR)

The Purchase Rate (PR) refers to the price at which a container is purchased or acquired by the business. This rate includes the initial cost of acquiring the container, including transportation, installation, and any other costs incurred to make the container ready for use. It is crucial in determining the container's capital cost and is recorded as an asset on the balance sheet.

• Formula:

$PR = \text{Cost of acquiring the container (purchase price + related expenses)}$

b. Charge-out rate (CR)

The Charge-out Rate (CR) is the rate at which a business rents out or leases its containers to others. It represents the income the business expects to generate from renting or leasing a container to a third party. This rate helps in calculating the revenue from container rental and is an important factor in profitability analysis.

• Formula:

$CR = \frac{\text{Rental income per unit}}{\text{Time period (e.g., per day, per month)}}$

c. Returnable rate or refundable rate (RR)

The Returnable Rate (RR) or Refundable Rate is the amount that the customer is charged when renting a returnable container. This rate is typically the deposit amount that is refunded to the customer once the container is returned in good condition. The refundable rate is usually recorded as a liability until the container is returned and the deposit is refunded.

• Formula:

$RR = \text{Deposit charged for the return of a container}$

d. Valuation rate (VR)

The Valuation Rate (VR) refers to the value assigned to the container for accounting purposes. It helps in determining the depreciation value and the overall worth of the container as an asset on the balance sheet. This rate takes into account factors like the purchase price, expected useful life, and depreciation.

• Formula:

$VR = \text{Current book value of the container (purchase cost - accumulated depreciation)}$

e. Hiring charge (HC)

The Hiring Charge (HC) is the cost charged to a customer or business for renting or leasing a container. It includes the cost of the container and any related service charges, such as maintenance or delivery fees. Hiring charges are an important source of income for businesses that lease their containers.

• Formula:

$HC = \text{Rental fee per container (including maintenance and service fees)}$

f. Hiring profit

The Hiring Profit refers to the profit earned by the business from renting out its containers. It is the difference between the total income generated from hiring the container and the associated costs, including the purchase cost, depreciation, maintenance, and other related expenses.

• Formula:

$\text{Hiring Profit} = \text{Hiring Revenue} - \text{Cost of the container} - \text{Depreciation and maintenance expenses}$

g. Retained profit

The Retained Profit refers to the portion of the business's profit that is retained for reinvestment or future expenses, rather than being distributed as dividends to shareholders or owners. In container accounting, this could relate to the profits generated from leasing or renting out containers that are reinvested into maintaining or expanding the container fleet.

• Formula:

$\text{Retained Profit} = \text{Net Profit} - \text{Dividends or distributions}$

i. Depreciation amount

The Depreciation Amount refers to the annual reduction in the value of the container, calculated based on the depreciation method used. Depreciation is an important consideration for containers, as it helps in allocating the container's cost over its useful life.

• Formula (for Straight-Line Depreciation):

$\text{Depreciation Amount} = \frac{\text{Cost of the Container} - \text{Residual Value}}{\text{Useful Life}}$

• Formula (for Reducing Balance Depreciation):

$\text{Depreciation Amount} = \text{Book Value at Beginning of Year} \times \text{Depreciation Rate}$

Summary of rates in container accounting

1. Purchase Rate (PR): The cost of acquiring the container.
2. Charge-out Rate (CR): The rate charged to rent out a container.
3. Returnable/Refundable Rate (RR): The deposit charged for returnable containers.
4. Valuation Rate (VR): The book value of the container after depreciation.
5. Hiring Charge (HC): The rental charge for hiring a container.
6. Hiring Profit: The profit from renting containers, after accounting for costs.
7. Retained Profit: Profits kept within the business for future use or reinvestment.
8. Depreciation Amount: The amount deducted from the container's value each year based on the depreciation method.