Storage and Use of Materials:
Materials, together with copy of the receiving report, or forwarded to the storeroom from the receiving or inspection department.
The storekeeper and assistants are responsible for safeguarding the materials, which means that materials and supplies are placed in proper bins or other storage spaces, that they are kept safely until required in production, and that all materials taken from the storeroom are properly requisitioned. It is good policy to restrict admittance to the storeroom to employees of that department only and to have these employees work behind locked doors, issuing materials through cage windows.
Since the cost of storing and handling materials may be a substantial amount, careful designs and arrangement of storerooms can result in significant cost savings. Materials can be stored according to:
- The materials account number.
- The frequency of use of the item.
- The factory area where the item is used.
- The nature, size, and shape of the item.
In practice, no single base is likely to be suitable, but the size and shape of materials usually dictate the basic storeroom arrangement variations can then be introduced, such as placing most frequently used items nearest the point of issue and locating materials used primarily in one factory area nearest that area.
Bin cards or stock cards are effective ready references that may be attached to storage bins, shelves, racks, or other containers. Bin cards usually show quantities of each type of materials received, issued, and on hand. They are not a part of the accounting records as such, but they show the quantities on hand in the storeroom at all times and should agree with the quantities on the materials ledger cards in the accounting department.
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: