Accounting for Material Costs

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Accounting for Material Costs

By | September 2011
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Accounting for Material Costs


The four main documents used in accounting for purchases are: a) a purchase requisition, which is a request addressed to the buying officer or purchase manager by the person requesting materials (either the storekeeper or a departmental manager) asking him to obtain particular quantities of specified items; b) a purchase order, which is the official request from the company to a supplier asking him to provide the goods required; c) a goods received note, which is the company’s record of what is actually received from a supplier; d) the supplier’s invoice (‘purchase invoice’) which shows the charge made to the company and on which payments to the supplier are based.


Good storekeeping invoices involves the following elements:
a) provision of suitable conditions and of security against fire and theft; b) full identification of all materials at all times;
c) correct location of all materials at all times, and economic use of storage space; d) speedy issue and receipt of materials;
e) maintenance of correct stocking levels;
f) correct up-to-date records of receipts, issues and stock in hand.

Location of stores
Materials may be kept in either a central (main) store or in a departmental (sub-) store. The advantages of a central store are: a) smaller stocks are needed;
b) a smaller overall staff is required, while staff can specialise in particular stocks; c) control of stock levels is simplified;
d) paperwork is reduced.

However, there are the following disadvantages of centralised storekeeping: a) increased handling and transportation costs to the point of usage; b) inconvenience to personnel and delays in issuing to departments; c) risk of increased loss in the event of fire and flood; d) increased effect on other departments if there is a breakdown in the system.

Store layout

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