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Material accounting
- 1. Material Accounting Dr. KshitijaGandhi Ph.D, M.Phil, M.com, MBA, NET
- 2. Meaning of Stores RawMaterial used in Production Consumable stores such as oil, grease, etc. Tools , patterns, maintenance materials etc. Stock of work in Progress Stock of Finished Goods Store Includes
- 3. Objectives of Storage Toensure 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
- 4. Objectives of Storage Toidentify and locate storage easily as to issue material immediately. To maintain upto date stores records. To facilitate stock taking.
- 5. Organisation Structure ofStores Department Issuing Assistant Records Assistant Receiving Assistant Stores Keeper Stores Manager Stock Taking assistant Material Requisition assistant
- 6. Functions of StoresDepartment 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.
- 7. Functions of StoresDepartment 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.
- 8. Functions of StoresDepartment 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..
- 9. To take physicalstock 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
- 10. To minimise thestorage 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
- 11. Material Requisition Meaning Itis a document which is used to authorize and record the issue of materials from the stores Who Prepares it? Foreman In case of Costly material : Higher Authority is Responsible. No. of copies Three 1. Store Keeper 2. Cost Accounting Department 3. Initiating Department Procedure Two copies of MRN are sent to store keeper. Store keeper makes entry in the Bin Card Sends Requisition to Cost accounting Department to fill up the rate and amount column. Makes the entries in Stores Ledger
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- 13. Bills of Material MeaningIs 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 Department 3. Cost Accounting Department 4. Engineering or Planning Department
- 14. Bills of Material Procedure 1.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
- 15. Material RequisitionBills ofMaterial
- 16. Material RequisitionMaterial ReturnNote • 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.
- 17. Two copies are sendto 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
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- 19. No Basis of Distinction PeriodicInventory 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 ids directly calculated by applying the method of valuation of inventories. Inventory System
- 20. No. Basis of Distinction PeriodicInventory 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
- 21. No . Basis of Distinction Bin CardStores 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
- 22. No. Basis of Distinction BinCard 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