chapter 11 - materials
TRANSCRIPT
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Chapter 11
Materials
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Materials
Materials which form
part of the cost ofmaking the product
Materials which cannot
be allocated to a specific
cost of the product Small components on
the cost unit due to their
immaterial value Example: machine
lubricant, screws and
bolts
Direct materials Indirect materials
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Coding
A code is a system of words,
letters, figures, or symbols
used to represent others.
Codes can be alphabetical
and/or numerical.
The length and complexity of
codes depends on the needs
and complexity of the
organisation.
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Documents for buying and selling materials
Prime sources of cost and revenue information
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Purchase requisition
Prepared by the person who wants to buy the
goods, e.g. the storekeeper
Must be countersigned (authorised) by the
supervisor or department head
Then, passed to the
buyer (purchase
department)
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Letter of enquiry
Prepared by the
purchase department tofind the appropriate
suppliers, prices, and
other related details
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Quotation
Customer
Supplier A
Supplier C
Supplier B
Quotation
Catalogue
Price list
/estimate
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Purchase order
Prepared when the appropriate suppliers
have been selected
To ask for the goods to be
suppliedCopies of the order are sent
to: the supplier, the accounts
department. the stores section,
and the goods received section
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Advance note
Prepared by the
supplier to say
when the goods
will be delivered
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Delivery note
Prepared when
goods is delivered
Confirmed by the
driver for the
customer
One copy sent to the
supplier
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Consignment note
Used if the supplier
does not use its own
transport
Provide the same
evidence as the
advice note
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Goods Received Note (GRN)
Prepared and sent toother department to let
them know that the goods
have arrived Copies sent to: the
account department, the
stores section, the buyer,
and the goods received
section
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Invoice
Sent from the suppliers sales department,
detailing the amount that the customer have
to pay
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CUSTOMER SUPPLIER
Step 1
Step 2
Step 3
Step 4
Step 5
Step 6
Step 7
Step 8
Purchase requisition to tell buyer whatis required
Enquiry to suppliersCatalogue, quotation, letter of reply
Select supplier and send purchase order
Advice note of delivery date
Delivery or consignment note to detailgoods delivered and signature on
delivery
Invoice to tell the customer what to pay
Check invoice and make payment
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Documents for recording materials
Help to manage material inventory level after
every transaction occurred
Can be either manual or computerised
Two main types: bin cards and store ledger
account which are both updated from the same
sources: GRNs and MRNs
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Bin card
Be manual records that are written up and
kept in the stores department
Include information about:
Description of inventory recorded
Inventory code
Inventory units
Bin number
Details of movements
Reorder level
Max/Min level
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Store ledger account
Be computerised Record cost details so
that the unit cost and
total cost of each issue
and receipt is shown
The balance after each
movement is shown.
Be kept in the costing
department separate
from the store.
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Free stock
Inventory on hand + Inventory on order
Inventory thathas been scheduled for used
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Material requisitions
Be completed when materials are needed by
the production department
Be sent to the store before materials are
issued
Be used as a source document for
Updating the bin card in stores
Updating the store ledger account
Charging costs to the department or job
that is using the materials
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Materials Returned Note (MRN)
Accompany any unused material back to
stores
Contain the same details as the materials
requisition
Be used as the source document
A reduction from the job original charged
with the material issued
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Stock checking
BIN CARD
STORE LEDGER ACCOUNTS
Check theaccuracy of the
records
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Material Control Cycle
Orders from the storesdepartments using amaterials requisitionnote
Delivers goods
to storesdepartment
Issues goods toproduction department
PURCHASINGDEPARTMENTEXTERNAL SUPPLIER
Production Department
The user of the goods
Stores Department
Requisition goods frompurchasing departmentusing a purchaserequisition
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Accounting for Materials
Direct materials
Materials issued
DEBIT Work in Progress Control AccountCREDIT Materials Control AccountIndirect materials
DEBIT Production overheadCREDIT Materials Control Account
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Accounting for Materials
Direct materials
Materials returned
DEBIT Materials Control AccountCREDIT Work in Progress Control AccountIndirect materials
DEBIT Materials Control AccountCREDIT Production overhead
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Revision
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Question 1
Extract from code list
Telephone expenses 5500-5599
5510 General administration
5530 Sales and marketing
5570 Manufacturing
Telephone numbers and locations
020 7668 9923 Managing director
020 7668 9871 Marketing manager
020 7668 9398 Factory floor
020 7668 9879 Accounting office
0879 6534 Salespersons mobile
Which telephone lines would you charge to code 5510?
A. Sales persons mobile and the marketing manager
B. Managing director and accounts officeC. Factory floor and accounts office
D. Managing director and marketing manager
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Question 1
Extract from code list
Telephone expenses 5500-5599
5510 General administration
5530 Sales and marketing
5570 Manufacturing
Telephone numbers and locations
020 7668 9923 Managing director
020 7668 9871 Marketing manager
020 7668 9398 Factory floor
020 7668 9879 Accounting office
0879 6534 Salespersons mobile
Which telephone lines would you charge to code 5510?
A. Sales persons mobile and the marketing manager
B. Managing director and accounts officeC. Factory floor and accounts office
D. Managing director and marketing manager
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Question 2
You work for the accounts department of AbacusLtd and have received invoice number 1340 from a
supplier for checking. Which documents will you
need to check the details of the invoice to?A. Purchase order and goods received note
B. Goods received note and purchase requisition
C. Delivery note and purchase requisitionD. Advice note and despatch note
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Question 2
You work for the accounts department of AbacusLtd and have received invoice number 1340 from a
supplier for checking. Which documents will you
need to check the details of the invoice to?A. Purchase order and goods received note
B. Goods received note and purchase requisition
C. Delivery note and purchase requisitionD. Advice note and despatch note