Controlling and Costing Materials
Controlling and costing materials includes when goods are used in manufacturing and production. Controlling and costing materials describes that usage of material and prices should be controlled. Controlling and costing materials also aims to provide customers with reasonable price material as well.
Need for Materials Control: One of the first step in the installation of cost and management accounting system is planning the proper control of materials and supplies from the time orders are placed with supplier until they have been consumed in the plant and
Issuing and Costing Materials into Production: To control the quantity and cost of materials, supplies, and services requires a systematic and efficient system of purchasing, recording, and storing. Equally necessary is a systematic and efficient procedure for issuing materials and supplies. Materials Requisitions: The
Invoice Approval and Data Processing: By the time materials reach the receiving department, the company unusually will have received the invoice from the vendor. This invoice and a copy of the purchase order are filled in the accounting department. When the receiving report with
Companies should generally use the same inventory pricing methods or interim financial reporting and make provisions for write downs to make market at interim dates on the same basis as used at annual dates when preparing published financial statements. However, the following exceptions are
American Institute of Certified Public Accountants (AICPA) Cost or Market Rules–Inventory Valuation The American Institute of Certified Public Accountants (AICPA) moved away from the traditional cost or market, whichever is lower principle of valuing inventories. After defining inventory and that the major objective of
Cost or Market Whichever is Lower–Inventory Valuation: American costing tradition follows the practice of pricing year-end inventories at cost or market, whichever is lower (lower of cost or market). This departure from any experienced cost basis is generally defined on the grounds of conservatism.
Cost of Acquiring Materials | Materials Acquisition Cost: A guiding principle in accounting for the cost of materials is that all costs incurred in entering a unit of materials into factory production should be included. Acquisition costs, such as the vendor’s invoice price and
Correcting Invoices: When the purchases order, receiving report, and invoice are compared, various adjustments may be needed as a result of the circumstances described below: Some of the materials ordered are not received and are not entered on the invoice. In this case no
First In First Out (FIFO) – Materials and Inventory Costing Method: Learning Objectives: Define and explain FIFO method. Give an example of FIFO costing method What are advantages and disadvantages of fist in first out (FIFO) costing method? Definition and Explanation of FIFO Method
Electronic Data Processing System (EDP System) for Materials Received and Issued: The preceding description of invoice approval and payment was for a manual operation performed by an accounts payable clerk or an invoice clerk. In an electronic data processing system (EDP system), the computer–to