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Accounting for Material Costs

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Accounting for Material Costs

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Accounting for Material Costs

PURCHASE DOCUMENTATION
Requirements

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.

STOREKEEPING
Objectives

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
The...

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