Description………. Bin No……….
………. Code No……….
Recorder Quantity………. Maximum Stock level………
Stores Ledger Fo……… Minimum Stock level………
Recorder level………...
Date G.R. Quantity Date M.R. Quantity Quantity Goods on Order
No. and Audit
Notes
Figure 7: Bin Card
The storekeeper records the movement in and out of the materials under his control. He should show in the balance column the actual quantity of the particular material in stock at any time.
Note: G. R. No: Goods received note number.
M. R. No: Materials requisition number.
For each material in store the maximum and minimum quantities to be carried are stated on the card. These limits, which are determined by the production control department, from time to time these maxima and minima will be reviewed and may be altered to suit current requirements.
To facilitate ordering of further supplies, the normal quantity to order is sometimes stated at the head of the card; this quantity will indicate the customary market units to as to avoid requisitions for irregular quantities.
The various receptacles in which materials are stored are numbered, the bin card for each being similarly numbered. Where identifying code numbers are used for materials it is advantageous to attach them to the bin and to quote them on the bin card.
3.4 Stores Ledger
The stores ledger is kept in the cost accounting department. In it is recorded the same information as the storekeeper records on the bin cards, but also the money values are shown. Correct stores accounting is as important as accounting for cash, hence the separation of this clerical work from the actual handling of the materials in store. The ledger is usually of the loose-leaf or card type, each account representing an item of material.
The debit side is prepared from the goods received notes or invoices and from materials return notes: the credit side either directly from the materials requisitions or from the abstract summary complied from them. Additional columns may be shown for materials ordered and for materials reserved for special jobs.
3.5 Stores Control
3.5.1 The Perpetual Inventory System
This is a method of recording stores balances after every receipt and issue of materials, so that the balance of stock at any time can be ascertained immediately. It is often used in conjunction with a system referred to as “continuous inventory”, which is a method of making a physical check on stores balances at frequent, irregular intervals.
The balances of any account in the stores ledger for a particular item of stock should agree with the balance on the bin card, and a frequent checking of these dual records should be made as well as of the actual quantity in stock.
In large stores a system of continuous checking is instituted, a number of items of materials being counted daily and compared with the bin cards and stores ledger, by a stores audit clerk. Discrepancies are investigated; many may be clerical errors, which will be corrected.
When, however, the stock is incorrect an investigation is made, after
which any shortage or surplus is adjusted in the records to make them correspond with the physical stock. This may be done conveniently by making out a credit note or debit note, as the case may be, for the difference and then, after obtaining authority to pass the adjustment through the cost journal, crediting (or debiting) a stock adjustment account. The balance on that account is written off direct to profit and loss account at appropriate times.
The common causes of differences are incorrect entries, breakages, pilferage, evaporation, breaking bulk, short or over issues, absorption of moisture, and placing of stores in the wrong bins.
The advantages of the system are as follows:
a) The long and costly work of stocktaking is avoided, and the value of the stock of materials as shown by the stores ledger can be obtained quickly for the preparation of a profit and loss account and balance sheet.
b) A continual, detailed, reliable check on the stores is obtained.
c) Discrepancies are readily discovered and localized, giving an opportunity for preventing a recurrence in may cases.
d) The moral effect on the staff tends to greater care, and serves as a deterrent to dishonestly.
e) The audit extends to comparison of the actual stock with the authorized maxima and minima, thus ensuring that adequate stocks are maintained within the prescribed limits.
f) The storekeeper’s duty of attending to replenishments is facilitated, as he is kept informed of the stock of every kind of material.
g) The stock being kept within the limits decided upon by the management, the working capital sunk in stores materials cannot exceed the amount arranged for.
h) The disadvantages of excessive stocks are avoided, e.g. (i) loss of interest on capital locked up in stock; (ii) loss through deterioration;
(iii) danger of depreciation in market values; (iv) risks of obsolescence.
i) It is not necessary to stop production so as to carry out a complete physical stocktaking.
j) Experienced men can be employed to check the stock regular intervals.
3.5.2 Materials Issued at an Inflated Price
Wastage of materials frequently occurs in a store due to evaporation, deterioration in quality, or some similar cause. When this occurs it is necessary to charge materials issued to production at an inflated price to ensure that the true cost is recovered.
If 100kg of material is bought at N0.54 per kg, and it is known fron past experience that the normal wastage of this material is 10%, the charge to production would be N 54
90 = N 0.60
3.5.3 Recording Material Notes
Goods received notes are priced from orders or invoices, and materials requisitions are priced from the stores ledger. Materials transfer notes and materials return notes are priced from the cost ledger. A summary of the procedure is shown in Fig. 9.
RECORDING