Cost Accounting · Ch 2 — Material
Storing of Material
Storing of Material
Once material has been purchased and received, it must be properly stored, recorded and safeguarded until it is issued to production. This is the function of the stores organisation, headed by the store-keeper. Good storing keeps material safe from theft, damage and deterioration, makes it easy to locate and issue, and — through its records — keeps an accurate account of what is in stock.
Stores organisation
The store is the place where materials are kept. Its duties are to receive material into store, keep it safely and in good condition, issue it against proper authority (a Material Requisition Note), and keep records of receipts, issues and balances. Stores may be centralised (one store for the whole factory — better control and lower stock investment, but material travels further) or decentralised (a store per department — faster issue, but duplicated staff and higher stock), and many factories combine both.
Two key stores records — the Bin Card and the Stores Ledger
Bin Card
A Bin Card is a quantity-only record maintained by the store-keeper, kept along with the material at the bin/rack, showing the receipts, issues and running balance of that item in QUANTITY alone — no values are recorded.
Stores Ledger
A Stores Ledger is a record maintained by the Costing/Accounts Department showing both the QUANTITY and the VALUE (₹) of every receipt, issue and balance of each item, with issues priced under a chosen method (FIFO or Weighted Average).
| Basis | Bin Card | Stores Ledger |
|---|---|---|
| Maintained by | Store-keeper | Costing/Accounts Department |
| Location | With the material (at the bin/rack) | In the accounts/costing office |
| Records | Quantity only | Quantity AND value (₹) |
| Entries made | Immediately, as material moves | Somewhat later, from GRNs and requisition notes |
| Purpose | Physical quantity control at the store | Cost ascertainment and material accounting |
Since both records track the same item independently, their QUANTITY balances should always agree — any difference signals an error or a genuine loss needing investigation.
Physical (periodical) stock taking
Physical / Periodical Stock Taking
Physical stock taking is the process of physically counting, weighing or measuring the actual stock of every item at the end of a period (say a year), so that the actual physical stock can be compared with the balance shown by the records.
Under this system the whole stock is counted at one time, usually at the year-end, often requiring production to be halted while the count is done. Its drawback is exactly that — the entire stock is verified only once in a while, work piles up on the counting days, and errors go undetected between counts.
Perpetual inventory system
Perpetual Inventory System
The Perpetual Inventory System is a system of records (Bin Cards and the Stores Ledger) that shows the quantity and value of stock in hand at all times, supported by continuous stock verification, so that a few items are physically checked every day against the records throughout the year. …
A quantity-only record kept by the store-keeper with the material itself, showing receipts, issues and b …
A quantity-cum-value record kept by the Costing/Accounts Department, showing receipts, issues (priced under a chosen method) and balance in …
A system of up-to-date stock records (Bin Card + Stores Ledger) backed by continuous daily physical verification of a few items, giving a reliable bal …