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Packing Material

sidharth (owner) (59 Points)

07 January 2010

we are a trading concern

We buy a product and sell the same to the end user after re packing it in small boxes.

We get the invoice for packing boxes (local bill with VAT)

Now what should be the entry for this invoice, direct expense or misc. expense ??

Thanks in advance...

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7 Replies

Amir (Learner) (4016 Points)
Replied 07 January 2010

Dear Sidharth,

Generally an item is treated as Direct Expense if it is directly related to the operations of the Organization..(Like Wages to Labour for a manufacturing Concern will be treated as Direct but Salary to officers/executive will be treated as Indirect Expense)

Since Re-packing is ur core activity as u have mentione then it should be treated as Direct Expense..However, if amount is not much as compared to other expenses than it can also be treated as Misc./Other Expenses..

sidharth (owner) (59 Points)
Replied 07 January 2010

thanks for a quick reply...

Direct Expenses looks to be the right choice..

So can I make a 'packing expenses' account and enter bills of packing boxes here...

Should i enter inventory details or it can be skipped....

we also charge packing charges from our customers in our sale bills can we use the same head for entering purchase bills of packing boxes...??

Amir (Learner) (4016 Points)
Replied 08 January 2010

Dear Sidharth,

The first option to book it separate from the one u collect from ur customers is better option..

Further, I would suggest u to keep track of inventory as well..But again if at any given point u r not holding inventory of much value in relation to ur expenses then u can book entire as expenses..

Best is to enter inventory details on following grounds:-

1) Better Monitoring,

2) Clear Accounting

3) Cost Control view point..

Manoj (Accountant) (66 Points)
Replied 18 December 2020

its better to skip if u r not maintaining inventory ..

only accounting entry is enough

rajesh paul (4 Points)
Replied 28 August 2023

DAMAGE PACKGING CARTOONS SALE ACCOUNTING HEAD

Yasaswi Gomes new (Finance ) (4474 Points)
Replied 02 September 2023

There are different things here. If your repacking then you have a principle agent relationship. If your billing invoice as commission then the above is satisfied. But if your making entries as purchases and sales, then your the owner of the goods. A wholesaler is a principle agent relative not unless risks and rewards lies with the repackaging guys.