Storing and Issuing Materials - Module on Cost Accounting PDF

Preview

Summary

Storing and Issuing Materials...

Description

Chapter 3 - Storing and Issuing Materials Storing Materials According to Pedro P. Guerrero, the storeroom supervisor is responsible for the protection of materials in the storeroom, and for identification of the materials. Each type of material is assigned a number, indicating the type of materials and its location. Materials are stored in a systematic manner in bins, on racks, or on shelves.¹ Attached to each bin or rack is a bin tag. The bin tag is an informal record showing the quantities of the materials received, issued, and on hand at all times.¹ Issuance of Materials Materials Requisition No materials are issued from the storeroom without a materials requisition. The materials requisition is prepared in duplicate by the department head or job supervisor. The requisition indicates the quantity, material number, description, and job number to which the materials are to be charged.¹ Upon receipt of the materials requisition, the storeroom supervisor issues the materials and makes the necessary notations on the requisition. One copy is filed as a receipt, and the second copy is given to the storeroom clerk.¹ Materials Ledger The storeroom clerk computes and records the cost of the materials issued in the Issued section of the materials ledger card, computes the new quantity on hand, and records it in the Balance section.¹ A materials ledger card is kept for each type of material on hand. Each card serves as a perpetual inventory record. The material ledger is a subsidiary ledger which is verified against the Materials account in the general ledger.¹ Materials Requisition Journal After recording the requisition in the related materials ledger card, the requisition is forwarded to the cost clerk, who journalizes the transaction in a special journal, the materials requisition journal so that the effect of the issuance will be reflected in the general ledger cost accounts.¹ Job Cost Sheet The cost clerk will post the information from the requisition to the Materials section of the job cost sheet. Only direct materials are posted in the job cost sheet to charge a particular job.¹

¹Pedro P. Guerrero, Cost Accounting – Principles and Procedural Applications, 2014-2015 Edition

Department Overhead Analysis Sheet All indirect manufacturing expenses such as indirect materials are posted from a requisition for such materials to the Indirect Materials section of the departmental overhead analysis sheet.¹ Materials Internal Control The internal control procedures for storing and issuing materials should reflect the following principles: a. Admittance to the storage area should be restricted.¹ b. Materials ledger cards, covering all receipts and issuances should be maintained.¹ c. Each type of material should be clearly identified, stored, and carefully protected while in storage.¹ d. Materials should be issued only upon proper written authorization.¹ e. The accounting system should permit a periodic check of the materials ledger against the balance of the Materials account.¹ f.

Different persons should be involved in storage and issuance operations.¹

Special Issuing Procedures Materials Returned to Storeroom Materials returned to storeroom as a result of requisitioning too many materials, withdrawing wrong materials or other reasons must be accompanied by a returned materials report.¹ The returned materials report is prepared in duplicate. The report may be filled out by the department that originally requisitioned the materials or by the storeroom supervisor.¹ The materials returned are entered in the bin tag in parenthesis under the Quantity Issued column. The number of units returned is added to the balance.¹ The returned materials report is given to the storeroom clerk, who will do the following steps: a. Enters the unit and total cost figures on the report. The unit cost is the same as that used when the materials were charged out.¹ b. Makes an entry in parenthesis in the Issued section of the materials ledger card. The new quantity and cost are then entered in the Balance column of the card.¹ c. Send the returned materials report to the cost clerk, which completes the two important entries as follows:

1. An entry in parenthesis in the Indirect Material column of the departmental overhead analysis sheet or in the Materials section of the appropriate job cost sheet.¹ 2. An entry covering the return in the Returned Materials Journal. The totals of the Materials Requisition Journal and the Returned Materials Journal are posted in summary form to the appropriate general ledger accounts at the end of the month.¹ Materials Returned to Supplier A Return Shipping Order authorizing the return is prepared by the purchasing agent in triplicate together with a debit memorandum which is also prepared in triplicate. ¹ One copy each of the return shipping order and the debit memorandum is kept by the purchasing agent. One copy of the return shipping order is sent to the shipping department as authorization to return the materials to the supplier. One copy of the return shipping order and the debit memorandum is sent to the accounting department for its records.¹ The storeroom clerk receives a copy of the debit memorandum to be used in recording the return in the materials ledger under the Received column in parenthesis.¹ If the return is made before the voucher register is closed for the month, the original entry is corrected by making a notation in parenthesis for the amount of the return on the same line of the original entry.¹ At the end of the month, the entries in parenthesis are totaled. These totals are recorded by a debit to the Vouchers Payable account and a credit to Materials account.¹ If the voucher register has been closed for the month where the purchase was recorded, a new voucher is issued and recorded. Voucher Payable is debited for the original amount and is also credited for the revised amount; the difference is credited to Materials account.¹

SOURCE AND REFERENCE: Pedro P. Guerrero, Cost Accounting – Principles and Procedural Applications, 2014-2015 Edition...