Cost Accounting Procedure For Material In Job Costing

Cost Accounting Procedure for Material : Merchandise Inventory and Purchases are familiar accounts in trading concerns. In manufacturing enterprises, it is common practice to record all materials and supplies in one control account titled- Materials.

Procedures that affect the materials account involve the: Purchase of materials, Issuance of materials for factory use: Recording the Purchase of Materials in Cost Accounting Procedure for Material: Accounting techniques used for the purchase of materials vary little from those studied in general accounting.

The account debited is Materials or Materials Inventory (now used in place of the account Purchases), and the credit is made to Accounts Payable as materials are received. However, a posting to the materials account is not sufficient. Each purchase is also entered on an individual materials ledger card showing quantity received, unit price, and amount. The amount posted to each materials ledger card is added to the previous balance which provides a perpetual inventory.

 When materials are purchased, the approved invoice is recorded base on Cost Accounting Procedure for Material as:

 Materials         25,000

Accounts Payable         25,000

When the invoice is paid, cost Accounting Procedure for Material as:

Accounts Payable         25,000

 Cash / Bank                                  25,000

Materials returned to the vendor (2000 out of 25000) are recorded as follows:

 Accounts Payable  2,000

Materials                                  2,000

An entry for the returned materials is also made on the appropriate materials ledger cards.

Recording the Issuance of Materials in Cost Accounting Procedure for Material:

When a job is started, the materials necessary for the work are issued to the factory on the basis of materials requisitions prepared by production scheduling clerks or other employees. A copy of the requisition goes to the storekeeper who assembles the materials called for on the requisition. The materials requisition bears the job order number and specifies the type and quantity of materials required. The unit costs and the total costs of the materials are entered later on the requisition and posted to the materials ledger card.

 The flow of materials from storerooms to factory results in a transfer of raw materials from the materials account to the work in process account.

Essentially, each requisition results in a debit to Work in Process and a credit to Materials.

Materials requisitions are summarized and recorded based on Cost Accounting Procedure for Material as follows:

Work in Process   31,000

Materials                                 31,000

 This basic costing technique accumulates the quantity and cost of materials used in each job.

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