Material Accounting
Dr. Kshitija GandhiPh.D, M.Phil, M.com, MBA, NET
Meaning of Stores
Raw Material used in
Production
Consumable stores such
as oil, grease, etc.
Tools , patterns,
maintenance materials etc.
Stock of work in
ProgressStock of Finished
Goods
Store Includes
Objectives of Storage
To ensure uninterrupted supply of stores to the production and service departments
To prevent overstocking and Understocking
To ensure an effective an economic use of the available storage space and labour.
To minimise the cost of storage
Objectives of Storage
To identify and locate storage easily as to issue
material immediately.
To maintain upto date stores records.
To facilitate stock taking.
Organisation Structure of Stores Department
Issuing Assistant
Records Assistant
ReceivingAssistant
Stores Keeper
Stores Manager
Stock Taking
assistant
Material Requisition
assistant
Functions of Stores Department
To issue Purchase Requisition to Purchase Department when the stock reaches to the Re order Level
To receive the material from the Goods received Department or Goods Inspection Department
To maintain proper Record of balance, issue and receipt of Material.
Functions of Stores Department
To provide adequate and proper storage for every item.
To place and arrange materials received at proper place so that everything will be at its place.
To maintain proper Record of balance, issue and receipt of Material.
Functions of Stores Department
To keep the material safely as to avoid wastage, pilferage and deterioration.
To issue material against proper stores requisition.
To ensure that the stock should not exceed the maximum level nor the minimum level..
To take physical stock and compare with the actual balances as per the record as to find out discrepancies and take appropriate action in this behalf
To locate the slow moving and obsolete items and inform the management about them.
To check measuring equipments and their accuracy.
Functions of Stores Department
To minimise the storage handling and maintenance cost
To co coordinate and supervise the staff in the stores Department.
To check measuring equipments and their accuracy.
Functions of Stores Department
Material Requisition
Meaning It is a document which is used to authorize and record the issue of materials from the stores
Who Prepares it?
ForemanIn case of Costly material : Higher Authority is Responsible.
No. of copies Three1. Store Keeper2. Cost Accounting Department3. Initiating Department
Procedure Two copies of MRN are sent to store keeper.Store keeper makes entry in the Bin CardSends Requisition to Cost accounting Department to fill up the rate and amount column.Makes the entries in Stores Ledger
Material RequisitionMaterial Requisition
Bills of Material
Meaning Is a list of standard quantities of all materials required for a particular job or work order or a process.
Who Prepares it?
Engineering or Planning Department.
No. of copies Four copies 1. Production Department 2. Stores Department3. Cost Accounting Department4. Engineering or Planning Department
Bills of Material
Procedure1. Engineering or Planning Department sends three copies of
Bills of Materials to Production Department
2. Production Department sends two copies to Stores
Department
3. Stores Department makes entries in the Bin Cards and fills
up column 5 and 6 and then issues materials to the
Production Department and then sends copy of Bills of
Material after the signature of Cost Accounting Department.
4. Cost Accounting Department fills up rate and amount
column of BOM and makes entries in the stores Ledger
Material RequisitionBills of Material
Material RequisitionMaterial Return Note
• Material excess in requirement or defective are returned to
stores.
• Material returned with Material Return Note.
• MRN is similar to Material Requisition Note, Therefore two
separate colours are used for that.
Two copies are send to the
Department which
prepares it.
One copy is kept with the Department
for the reference.
Stores Dept. records in Bin Card & sends
ne copy to Cost Accounting Department
Cost Accounting Department
gives necessary
credit to the concerned
department for the material returned.
Three copies are prepared by Department which returns the material.
Material Return Note
Material Return Note
No Basis of Distinction
Periodic Inventory System
Perpetual Inventory System
1 Basis of Ascertaining Inventory
Inventory is ascertained on the basis of an actual physical count/measure/weight
Inventory is ascertained on the basis of Records
2 Calculation of Inventory
Inventory is calculated by applying methods of valuation like FIFO, LIFO
Inventory is calculated as Closing Inventory= Opening Inventory + Purchases – Cost of Goods Sold
3 Calculation of Cost of goods sold
Cost of Material issued = Opening Inventory + Purchases – Closing Inventory
Cost of Materials issued id\s directly calculated by applying the method of valuation of inventories.
Inventory System
No. Basis of Distinction
Periodic Inventory System
Perpetual Inventory System
4 Lost Goods Cost of Material issued may include Cost of Material Lost
Inventory may include Cost of Material Lost
5 Closing down of work for stock taking
It requires closing down of work for stock taking.
It does not require closing down of work for stocktaking.
6 Simplicity and Cost
It does not facilitate the continuous stock checking
It facilitates the continuous stock checking
7 Continuous Stock Checking
It is simple and inexpensive
It is elaborate and expensive.
Inventory System
No.
Basis of Distinction
Bin Card Stores Ledger
1 Materials on Order
It does not show Material On Order
It shows the materials on order
2 Where kept? It kept outside each bin It is kept at one place in cabinets or trays
3 Written by It is written by person handling materials.
It is written y person solely engaged in clerical work
4 Condition of record
It is not in clean condition due to proximity of material
It is kept clean and neat
5 Physical Identification
It facilitates on the spot comparison of physical stock because of proximity of material
It does not facilitates easy and physical identification of an item because of no proximity of material
Inventory System
No. Basis of Distinction
Bin Card Stores Ledger
6 Physical Verification
It facilitates on the spot comparison of physical stock with its book Balance
It does not facilitate on the spot comparison of physical stock with its book Balance
7 Chances of Errors
There would be less chances of errors because entries are made at a time as goods are received
There may be chances of errors because entries are made later on by the person who is handling material.
Inventory System