Returnable containers and single-use packaging: on which account are containers kept, what happens if a deposit is not returned and where is the expense recorded?
A drinking water company gives 19-litre bottles to customers against a deposit and packs small bottles into cardboard boxes. Which packaging goes into cost and which into selling expenses, why a returned deposit is not income, and what happens to a bottle that does not come back: the example of one company under NAS No. 4 and NAS No. 21.
"Tiniq Buloq" LLC sells drinking water in two forms: to offices and cafes in reusable 19-litre bottles, and to shops in 0.5-litre bottles packed into cardboard boxes. When closing the month, the accountant Sevinch got stuck on one question: the large bottle and the cardboard box are both "containers", but one comes back and the other does not. Can they be accounted for in the same way? The answer is in a separate chapter of NAS No. 4 ("Specifics of accounting for containers", paragraphs 79–86).
What are containers and what types are there?
NAS No. 4 defines containers as an item used for storing, packing and transporting products (goods) (paragraph 3). By purpose there are three types (paragraph 79):
| Type | What for | Example at "Tiniq Buloq" |
|---|---|---|
| Storage containers | storing inventories in the warehouse or carrying out a technological process | drums in which reagents are kept in the workshop |
| Packing containers | packing inventories in production, in the warehouse or at the point of sale | cardboard boxes for 0.5-litre bottles, stretch film |
| Transport containers | transporting and storing from the producer to the consumer | 19-litre bottle |
By number of uses there are two types (paragraph 80). Reusable containers circulate between supplier and consumer again and again and, once empty, are returned in the manner set by the contract or the law. Single-use containers are expensed when issued to production or when the inventories leave, and do not come back.
At the producer, all containers (except those used as household supplies) are kept on account 1060 "Containers and packaging". Materials and parts intended for making and repairing containers are also kept there (NAS No. 21, paragraph 96; NAS No. 4, paragraph 84).
Which expense does single-use packaging go to?
Paragraph 81 draws a clear line: single-use containers used to pack products in the production process go into cost, while those used to pack goods in the warehouse and at the point of sale go into selling expenses.
| Transaction | Debit | Credit | Amount, soum | NAS No. 21 |
|---|---|---|---|---|
| 2 000 19-litre bottles purchased (40 000 soum each) | 1060 | 6010 | 80 000 000 | Paragraph 104, line 1 |
| Bottles packed into 5 000 cardboard boxes in the workshop (1 800 soum each) | 2010 | 1060 | 9 000 000 | Paragraph 104, line 12 |
| Pallets wrapped in 40 rolls of film in the warehouse before dispatch (55 000 soum each) | 9410 | 1060 | 2 200 000 | Paragraph 104, line 15 |
The same item (film, for instance) can go to two different accounts depending on where it was used. So when issuing from the warehouse, write "workshop" or "warehouse/sales" clearly on the document. Prices are taken excluding VAT.
Bottles under deposit: what happens if the deposit is returned or not returned?
"Tiniq Buloq" does not sell the 19-litre bottle to the customer, it hands it over against a deposit. Under paragraph 82, the deposit is shown on a separate line of the invoice and is not added to the selling price of the product.
The "Navbahor" cafe took water in 300 bottles, with a deposit of 50 000 soum per bottle, 300 × 50 000 = 15 000 000 soum in total. The result three months later:
| Situation | Bottles | Deposit, soum | Effect in the accounts |
|---|---|---|---|
| Returned in usable condition | 270 | 13 500 000 | the deposit is returned to the cafe; this is not an income-generating transaction (paragraph 82) |
| Not returned within the set term | 30 | 1 500 000 | the deposit is not returned and goes to the financial result of "Tiniq Buloq" (paragraph 83) |
The rule of paragraph 83 for the 30 bottles not returned: handing over the bottles is reflected as income and expense from the main activity in the period in which they arise. Income is the deposit of 1 500 000 soum, the expense is the carrying amount of the bottles, 30 × 40 000 = 1 200 000 soum, and the result is +300 000 soum. The NAS No. 21 table has no specific line for deposit settlements: set out in your accounting policy which accounts they pass through.
Returned bottles are taken back by the supplier at carrying amount (paragraph 82). If the company sells returned bottles to another supplier or to a container maker, this becomes an income-generating transaction.
How are washing, repair, broken and lost bottles recorded?
Repairing and servicing reusable containers (cleaning, replacing certain parts) are period expenses (paragraph 85). If the contract provides for it, the buyer may bear the cost of bringing a returned bottle back into working condition.
| Transaction | Debit | Credit | Amount, soum | Basis |
|---|---|---|---|---|
| The company's own auxiliary workshop washed the 270 returned bottles and replaced their seals (4 000 soum each) | 9430 | 2310 | 1 080 000 | NAS No. 21, paragraph 126, line 39 |
| 5 bottles found missing at a stocktake, no culprit identified | 5910 | 1060 | 200 000 | NAS No. 21, paragraph 104, line 18 |
The 12 cracked bottles that can no longer be used (12 × 40 000 = 480 000 soum) are written off under a certificate to the relevant expense items (NAS No. 4, paragraph 86). Which item (selling or production) depends on where the bottle was used: set this in the accounting policy.
Bottles on 1060 at the end of the year:
| Indicator | Units | Amount, soum |
|---|---|---|
| Purchased | 2 000 | 80 000 000 |
| Not returned by the cafe | 30 | 1 200 000 |
| Written off as unusable | 12 | 480 000 |
| Shortage | 5 | 200 000 |
| Balance | 1 953 | 78 120 000 |
What about a trading company?
Wholesale depots and shops keep purchased containers on goods accounts (NAS No. 21, paragraph 144): there is account 2950 for filled and empty containers (except glass containers in retail trade and catering buffets). They may be kept at an average accounting price set for the container group; the difference between the purchase price and the average accounting price is taken to 9390 "Other operating income" or to the account of other operating expenses (paragraph 149).
Practical tips
- Keep an "issued, returned, owed" table for bottles under deposit by customer: under paragraph 83 the result depends precisely on the day the return term expires.
- Show the deposit on a separate line in the contract and the invoice, otherwise it gets mixed into the selling price.
- When issuing single-use packaging from the warehouse, separate "workshop" from "sales": one increases cost, the other selling expenses.
- Do not write off a broken bottle without a certificate: paragraph 86 requires exactly that certificate.
Test yourself
5 questions on this topic: pick an option or reveal the answer.
An accountant found a wrong journal entry. He recorded that entry again with exactly the same accounts but with a minus (negative) amount, and then made the correct journal entry. What is this correction method called?
Which of the following expenses is recorded in account 9430 "Other operating expenses" under NAS No. 21?
Zomin Tuz LLC withheld an amount from an employee's wages in favour of another organisation under a court enforcement document. In which account under NAS No. 21 is this liability kept?
A farm sold animals being raised (1110). According to the table of the 9100 accounts in the NAS No. 21 Instructions, how is the cost of animals being disposed of recorded?
"Kosonsoy shisha" LLC has soum settlement accounts at two different banks. How is analytical accounting kept for the account in group 5100?
Answered: 0 / 50 of 5 correct
All tests →See also
Sources
- NAS No. 4 "Inventories" (approved by Order No. 24 of the Minister of Finance dated 28 May 2020, registered by the Ministry of Justice on 30 June 2020 under No. 3259), paragraph 3 · concept of containers: an item used for storing, packing and transporting products (goods)
- NAS No. 4 "Inventories" (approved by Order No. 24 of the Minister of Finance dated 28 May 2020, registered by the Ministry of Justice on 30 June 2020 under No. 3259), paragraphs 79, 80, 81, 82, 83, 84, 85 and 86 · three types of containers by purpose; reusable and single-use containers; single-use containers to cost or to selling expenses; the deposit on a separate line and not income when returned; if not returned, the deposit goes to the supplier's financial result; materials for containers; repair and servicing to period expenses; unusable containers expensed under a certificate
- NAS No. 21 "Chart of Accounts for Accounting of Business Entities and Instructions for Its Application": paragraph 96 · account 1060 "Containers and packaging" covers all types of containers (except those used as household supplies) and materials and parts for making and repairing containers
- NAS No. 21 "Chart of Accounts for Accounting of Business Entities and Instructions for Its Application": paragraph 104 (lines 1, 12, 15 and 18) · Dt 1010-1090 – Ct 6010; Dt 2010 – Ct 1010-1090; Dt 9410 – Ct 1060; Dt 5910 – Ct 1010-1090
- NAS No. 21 "Chart of Accounts for Accounting of Business Entities and Instructions for Its Application": paragraph 126 (line 39) · line for costs and losses on returnable and reusable containers: Dt 9430 – Ct 2310
- NAS No. 21 "Chart of Accounts for Accounting of Business Entities and Instructions for Its Application": paragraphs 144 and 149 · in trading companies purchased containers are kept on goods accounts; 2950 "Containers, filled and empty"; average accounting price and the difference taken to 9390 or other operating expenses
- Example, company names, quantities and amounts · compiled by the author, hypothetical