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Home Materials and Inventory Cost Control Requirements of a System of Materials Control


Requirements of a System of Materials Control:

The important requirements or essentials of adequate satisfactory system of materials control are as follows:

  1. Proper Coordination
  2. Competent Purchasing Agent
  3. Use of Standard Forms
  4. Control by Budgeting Materials and Equipment
  5. Storage Location
  6. Operation of Perpetual Inventory
  7. Standards or Level to be Fixed
  8. Storage Control and Issue
  9. Internal Check
  10. Development of Controlling Accounts and Subsidiary Records
  11. Regular Reports

Proper Coordination:

Proper coordination of all departments involved, in material purchasing, receiving, testing, approving, storage, issue and accounting is essential.

Competent Purchasing Agent:

Centralization of purchasing in a purchasing department under the direct and authority of a competent trained purchasing agent is also considered essential.

Use of Standard Forms:

The use of standard forms for orders, requisition etc., upon which written and signed instructions are given are essential for proper control of materials.

Control by Budgeting Materials and Equipment:

Use of materials, supplies and equipment budgets so that the economy in purchasing and use of materials can be realized, is important factor for adequate control of materials.

Storage Location:

Storage of all materials and supplies should be in a designated location properly safe guarded under supervision and proper planning should be there for storing and issuing of materials.

Operation of Perpetual Inventory:

Operation of proper perpetual inventory system should be used so that it is possible to determine at any time the amount and value of each kind of materials in stock. It  also enables the comparison of book inventory with the result of physical counting.

Standards or Level to be Fixed:

A minimum quantity of each item of materials, below which point the inventory is not allowed to drop, and a maximum quantity, above which stock is not carried should be fixed. In the same manner ordering level and economic order quantity may be determined.

Storage Control and Issue:

The proper operation of a system of stores control and issue is introduced so that there will be delivery of materials upon requisitions to departments in the right amount at the time they are needed.

Internal Check:

The operation of internal check should be introduced to ensure that transactions involving materials and equipment are checked by reliable and independent officials.

Development of Controlling Accounts and Subsidiary Records:

Controlling accounts and subsidiary records reveal  summary of detailed materials costs at each stage of materials receipt and consumption from the storeroom to finished goods.

Regular Reports:

Regular reports and information should be provided for the management in connection with the purchase of materials, issues from stock, inventory balances, obsolete stock, goods returned to vendors, and spoiled of defective units.

You may also be interested in other articles from "materials and inventory cost control" chapter.

  1. Need for Materials Control
  2. Requirements of a System of Materials control
  3. Stock Control
  4. Ordering Level or Ordering Point or Re-order Level
  5. Minimum Level or Minimum Limit
  6. Maximum Level or Maximum Limit
  7. Danger Level
  8. Economic Order Quantity EOQ


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Managerial Accounting

Introduction to Managerial Accounting
Business and Quality Improvement Programs
Cost Terms, Concepts and Classification
Job Order Costing system
Process Costing System
Process Costing System - Addition of Materials & Beginning Inventory
Controlling and Costing Materials
Materials and Inventory Cost Control
By Products and Joint Products Costing
Variable Costing System
Activity Based Costing System
Budgeting and Planning
Standard Costing and Variance Analysis
Gross Profit Analysis
Linear Programming Technique
Segment Reporting and Transfer Pricing
Capital Budgeting Decisions
Service Department Costing
Cash Flow statement
Financial statement Analysis
Pricing Products and Services
Managerial Accounting Terms and Definitions
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Financial Accounting

Bookkeeping and Bookkeeping Terms
Accounting Principles and Accounting Equation
Accounting For Bills of Exchange
Subdivision of Journal
Final Accounts
Capital and Revenue Items
Single Entry System/Accounting From Incomplete Records
Accounting For Non-Trading Concerns
Accounting for Consignment / Consignment Accounts
Accounting for Joint Ventures
Accounting for Depreciation

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