Course Title: Cost Accounting Lesson 2: Accounting for Materials Control and Issues AIMS AND OBJECTIVES i)The meaning of stores, store keeper and types of stores. ii)Classification and codification, the store control and inventory control. iii)Inventory turnover, ABC analysis, VED analysis and Stock levels calculation and Economic order Quantity iv)The store ledger and Bin card v)The issues of material and treatment of surplus material vi)The different methods of pricing of material and material losses Introduction Store is a place where the various items of materials are kept safely till they are issued for production. Every manufacturing concern maintains a store under the control of a person called storekeeper. The store department acts as a link between the purchasing department and production department. The materials required for the production will be issued from the store as an when it is needed. Meaning and Types of Store Store is a place where the various items of materials are kept safely till they are issued for production is called store. Types of stores:The following are the three types of stores: Centralised Stores-The usual practice in most of the concerns is to have a central store. In case of such a store, materials are received by and issued from one stores department. All materials are kept at one central store. Decentralized Stores -Under this type of stores, independent stores are situated in various departments. Handling of stores is undertaken by the storekeeper in each department. The departments requiring stores can draw from their respective stores situated in their department. The disadvantages of centralized stores can be eliminated if there are decentralized stores. Such type of stores set up to meet the requirements of materials of each production department are not very popular because of the heavy expenditure involved. Central Stores with Sub-stores -In large factories, departments are situated at a distance from the central store; so in order to keep the transportation costs and handling charges to minimum, sub- stores (in addition to the central stores near the Receiving Department) should be situated near production departments. For each item of materials, a quantity is determined and this should be kept in stock in sub-store at the beginning of any period. At the end of a period the storekeeper of each sub-store will requisition from the central stores the quantity of the material consumed to bring the stock up to the predetermined quantity. In short, these types of stores operates in a similar way to a petty cash system; so this system of stores is also known as the Imprest system of stores control. To conclude, the ideal course for a large factory to overcome the disadvantages of centralized and decentralized stores is to have central stores with sub-stores. STORE KEEPER All manufacturing concerns appoint a person known as the Storekeeper, Chief Storekeeper or the Stores Superintendent who is in charge of the stores department and is responsible for stores control. The storekeeper should have technical knowledge and wide experience in stores routine and ability of organizing the operations of the stores. He should be a man of undoubted integrity. Functions of Store Keeper The cost of raw materials is the largest elements of cost. Therefore it is imperative that utmost importance should be given to storekeeping. The main functions of the storekeeper are as follows: i)He must receive the materials, store them properly according to the goods inspection report or the invoice. ii)Materials are classified according to the nature, size, shape, price, etc. He must places them in definite places (racks or bins) and number them for easy identification. iii)He must initiate the purchase requisition when the material reaches the ordering level. iv) He should not allow unauthorized persons to enter the store room. v)He must maintain stock registers, entering therein all receipts, issues and balances. vi)He should issue materials only upon written material requisition duly signed by an authorized person. vii)All items must be entered in the bin cards and this must be tallied with ledger balances.
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