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The company I am auditing sells their goods in ...

The company I am auditing sells their goods in containers which are costly, and then re-buys the ...

The company I am auditing sells their goods in containers which are costly, and then re-buys the containers from them at a lower amount than previously charged. These are shown as empties in their books of accounts. How do I verify it?

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Chiranjibi Chapagain Mar. 12, 2018

When the empties or containers in which goods necessarily have to be supplied are costly, the manufacturer normally agrees to purchase them back at a reduced price as compared to the one charged for them. This is normal business procedure.

If you want to verify this account, you have to check that:

  • Separate account of issue and receipt of empties has been prepared.
  • In separate maintained a/c check how many empties lies in warehouse and how many are with customers.
  • Check how many empties customers may return after the close of the year.
  • Check whether proper provision has been made against the contingency of the containers being returned by customers and that for the wear and tear.
  • Check the amount of sale with entry in cash book.
  • See the sold empties are reduced from the inventory.
  • If the empties are sold on credit, ask for direct confirmation from purchasing party and confirm the sale.

The company I am auditing sells their goods in containers which are costly, and then re-buys the containers from them at a lower amount than previously charged. These are shown as empties in their books of accounts. How do I verify it?

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