Materials Ledger Card–Perpetual Inventory:
As purchased materials go through the systematic verification of quantities, prices, physical condition, and other checks, the crux of the accounting procedure is to establish a perpetual inventory – maintaining for each type of material a record showing quantities and prices of materials received, issued, and on hand.
Materials ledger cards or stock ledger sheets constitutes a subsidiary materials ledger controlled by the materials are inventory accounts in the general ledger or in the factory ledger.
Materials ledger cards commonly show the account number, description or type of material, location, unit measurement, and maximum and minimum quantities to carry. These cards are the materials ledger with new cards prepared and old ones discarded as changes occur in the types of materials carried in stock. The ledger card arrangement is basically the familiar debit, credit, and balance columns under the description of received, issued, and balance. Following is an example of material ledger card:
Example | Sample of materials ledger card:
|Piece or Part No.____________________ Reorder Point___________________
Description________________________ Reorder Quantity_________________
The approved invoice with supporting documents, such as the purchase order and receiving report, goes to the materials ledger clerk. These documents enable the clerk to make the necessary entries in the received section of the materials ledger card. Each receipt increase the balance on hand and the new balance is extended upon entry of the receipt.
Unsatisfactory goods or defective units should be detected by the inspection department before being stored or even paid for. The receiving report should show materials actually accepted, and the ledger entries are made after all adjustment. However, goods accepted in the storeroom may be found unsatisfactory after part of a shipment has been used in the factory, and the balance may then be returned to the vendor. Since these units were entered in the received and balance section of the materials ledger card when they were placed in the storeroom, an adjustment must be made. The recommended procedure is to enter the quantity and the value of the returned shipment in red in the received section and to reduce the balance accordingly.
When the storekeeper issues materials, a copy of the requisition is sent to the materials ledger clerk, who then makes an entry in the issued section of the materials ledger card showing the date, requesting number, job, lot, or department number, quantity, and cost of the issued materials. The new balance is computed and entered in the balance column. As already explained, these manual operations can be performed in an electronic data process (EDP) system based on the computer program designed for the materials transactions.
You may also be interested in other useful articles from “controlling and costing materials” chapter:
- Purchases of productive material
- Purchases of supplies, services, and repairs
- Materials purchasing forms
- Receiving materials
- Invoice approval and data processing
- Correcting invoices
- Electronic data processing (EDP) for materials received and issued
- Cost of acquiring materials
- Storage and use of materials
- Issuing and costing materials into production
- Materials ledger card – perpetual inventory
- First-in-First-Out (FIFO) Costing Method
- Average Costing Method
- Last-in-First-Out (LIFO) Costing Method
- Other Methods-Month end average cost, last purchase price or market price at date of issue, and standard cost
- Inventory valuation at cost or market whichever is lower
- American Institute of Certified Public Accountant (AICPA) cost or market rules
- Adjustments for departures from the costing method used
- Inventory pricing and interim financial reporting
- Transfer of materials cost to finished production
- Physical inventory
- Adjusting Materials Ledger Cards and Accounts to Conform to Inventory Accounts
- Scrap and waste
- Spoiled goods
- Defective work
- Discussion Questions and Answers about Controlling and Costing Materials
Other Related Accounting Articles: