ACCOUNTANCY A LEVEL(FORM SIX) NOTES – STATEMENT OF PROFIT OR LOSS ON CONTAINER

STATEMENT OF PROFIT OR LOSS ON CONTAINER

Hiring charge (charge out price – credit back price) x containers sent	xxx
Add: profit on containers retained (credit back – valuation)	xxx
No. of containers retained	xxx
Deduct: Depreciation of containers (cost of new container – valuation) x new containers bought	xxx
New containers bought	xxx
Repairs	xxx
Loss on container scrapped & sold (sales – valuation of container) x number of containers	xxx
Profit on container	xxxx

The Use of Containers Trading Account

In this case, the container trading account will be used to determine the profit or loss on containers. This account helps in tracking the trading activities related to containers, including sales, returns, and other transactions.

The container stock account will then be used to calculate the depreciation amount for the containers. This account records the value of containers held in stock and adjusts for depreciation and other changes in value.

DR CONTAINER STOCK ACCOUNT CR

DETAILS	QTY	RATE	AMOUNT	DETAILS	QTY	RATE	AMOUNT
Balance b/d – premises	x	Valuation	xxx	Containers retained	xx	Value	xxx
Customers	x	Valuation	xxx	Containers scrapped	xx	Valuation	xxx
Cash purchases	xx	Cost price	xxx	Depreciation	xx
				31/12 Balance c/d – premises	xx	Value	xx
Less: customers	xx	Valuation	xx
xxxx				xxxx

DR CONTAINER TRADING ACCOUNT CR

DETAILS	QTY	RATE	AMOUNT	DETAILS	QTY	RATE	AMOUNT
Returned	xx	Credit back price	xxx	Opening deposit return	x	Credit back price	xxx
Retained	xx	Valuation	xxx	Charged to customer	xxx	Charge out price	xxx
Scrapped	x	Valuation	xx	Sale of container
Depreciation			xx	Scrapped	x	Valuation	xx
Repairs			xx	Profit			x
Credit				Closing deposit	xx	Back price	xxx

DR CONTAINER DEBTORS ACCOUNT CR

DETAILS	QTY	AMOUNT	DETAILS	QTY	AMOUNT
1/1 Balance b/d	x	xxx	Returned
Credit back	xx		Receipt		xx
Trading to customer	xxx	xxx	Charge out price	xxx
Retained	xx
Balance b/d	xx

EXERCISE

Pankraparcrimparcat Co Ltd sells oil in drums which are charged at Tshs 10 each. Customers returning drums within a month are credited with Tshs 7.

The following information is available from the books:

Drums returnable on 1.1.1999: 4,000
Drums in stock as on 1.1.1999: 8,000
Drums purchased in 1999 at Tshs 5 each: 30,000
Drums sent out in 1999: 500,000
Drums returnable by customers: 480,000
Drums scrapped in 1999 (sold for 6,000): 2,000
Drums sent out in Dec 1999 lying with customers: 10,000
All drums at 31^st Dec 1999 are to be valued at 50% of the cost price
All drums as on 1.1.1999 were valued at Tshs 2.50 each
Amount received from drum debtors as on 1.1.1999 was Tshs 1,580,000

Required:

Prepare the drums trading account and drums debtors account.
Prepare a statement of profit or loss on drums for the year ended 31^st December 1999.

DR DRUMS STOCK ACCOUNT CR

DETAILS	QTY	RATE	AMOUNT	DETAILS	QTY	RATE	AMOUNT
Balance b/d – premises	8,000	2.5	20,000	Drums trading scrapped	2,000	2.5	5,000
With customers	4,000	2.5	10,000	Retained	14,000		45,000
Cash purchases	30,000	5	150,000	Depreciation			65,000
				Repairs			xx
Profit

DR DRUMS DEBTORS ACCOUNT CR

DETAILS	QTY	RATE	AMOUNT	DETAILS	QTY	RATE	AMOUNT
Drum D Returned	480,000	7	3,360,000	Balance c/d	4,000	7	28,000
Drum stock scrapped	2,000	7	14,000	Drum debtor sent	500,000	10	5,000,000
Retained	14,000		45,000	Cash sale of scrapped	2,000		6,000
Depreciation			65,000
Profit			1,489,000

FIFO method is used:

Valuation of drums retained = 10,000 @ 2.50 = 25,000

4,000 @ 5 = 20,000

Total = 45,000

Statement of profit or loss:

Hiring charge = (10 – 7) x 500,000 = 1,500,000

Add: profit on container retained = (7 – 2.50) x 14,000 = 63,000

Total = 1,563,000

Deduct: depreciation = (5 – 2.50) x 30,000 = 7,500

Loss on sales = 6,000 – (2.50 x 2,000) = 1,000

ecolebooks.com

Profit = 1,487,000

EXERCISE

Madras Chemicals Ltd supplies their products in returnable drums which are charged out at Tshs 20 each. Customers returning the drums within a month are credited with Tshs 18. The company’s procedure is to retain Tshs 18 in a deposit account until the expiry of the option period for return of the drums.

The following particulars are available from the drums:

Returnable drums as on 1.1.1991: 8,000
Drums in stock as on 1.1.1991: 16,000
Drums purchased during 1991 at Tshs 15 per drum: 20,000
Drums sent to customers during 1991: 300,000
Drums returned by customers in 1991: 288,000
Drums returnable on 31.12.1991: 15,000
Drums scrapped in 1991 sold for Tshs 10,000: 2,000

All drums as on 31.12.1990 and 31.12.1991 are to be valued at Tshs 10 each. All the amounts due in respect of drums had been collected from the customers.

You are asked to show the ledger accounts for 1991 for:

Drums stock.
Drums debtors.
Drums trading account.

DR DRUMS STOCK ACCOUNT CR

DETAILS	QTY	RATE	AMOUNT	DETAILS	QTY	RATE	AMOUNT
Balance b/d – premises	8,000	2.5	20,000	Drums trading scrapped	2,000	2.5	5,000
With customers	4,000	2.5	10,000	Retained	14,000	2.5	40,000
Purchases	30,000	5	150,000	Depreciation			65,000

DR DRUMS DEBTORS ACCOUNT CR

DETAILS	QTY	RATE	AMOUNT	DETAILS	QTY	RATE	AMOUNT
Drum D Returned	288,000	18	5,184,000	Balance b/d	8,000	18	144,000
Drum Trading sent	300,000	20	6,000,000	Retained	5,000	18	90,000

DR DRUMS TRADING ACCOUNT CR

DETAILS	QTY	RATE	AMOUNT	DETAILS	QTY	RATE	AMOUNT
Returned	288,000	18	5,184,000	Balance b/d	8,000	80	640,000
Balance c/d	310,000		6,154,000	Balance b/d	15,000	18	270,000
Profit			530,000

Statement on profit:

Hiring charge = (20 – 18) x 300,000 = 600,000

Add: profit on retained = (18 – 10) x 5,000 = 40,000

Total = 640,000

Less: depreciation (15 – 10) x 2,000 = 10,000

Loss on sales = 10,000 – (10 x 2,000) = 10,000

Profit = 530,000

ACCOUNTANCY A LEVEL(FORM SIX) NOTES – STATEMENT OF PROFIT OR LOSS ON CONTAINER

STATEMENT OF PROFIT OR LOSS ON CONTAINER