ACCA MA Syllabus C. Cost Accounting Techniques - Ordering, receiving and issuing of materials - Notes ^{1 / 22}

Documents for ordering, purchasing and receiving materials

Every movement of a material in a business should be documented using the following as appropriate:

1. Purchase requisition

   Current inventories run down to the level where a reorder is required. 

   The stores department issues a purchase requisition which is sent to the purchasing department, authorising the department to order further inventory.

2. Purchase order

   The purchasing department draws up a purchase order which is sent to the supplier. 

   Copies of the purchase order must be sent to the accounts department and the storekeeper (or goods receiving department).

3. Quotation

   The purchasing department may have to obtain a number of quotations if a new inventory line is required, the existing supplier's costs are too high or the existing supplier no longer stocks the goods needed.

4. Delivery note

   The supplier delivers the consignment of materials, and the storekeeper signs a delivery note for the carrier. 

   The packages must then be checked against the copy of the purchase order, to ensure that the supplier has delivered the types and quantities of materials which were ordered.

5. Goods received note

   If the delivery is acceptable, the storekeeper prepares a goods received note (GRN). 

   A copy of the GRN is sent to the accounts department, where it is matched with the copy of the purchase order. 

   The supplier's invoice is checked against the purchase order and GRN, and the necessary steps are taken to pay the supplier.

Procedures for ordering, purchasing and receiving materials

Proper records must be kept of the physical procedures for ordering and receiving a consignment of materials to ensure that:

• enough inventory is held

• there is no duplication of ordering

• quality is maintained

• there is adequate record keeping for accounts purposes

Documents for issuing inventory

1. Materials requisition note

   Materials can only be issued to production departments against a materials requisition. 

   This document must record not only the quantity of goods issued, but also the cost centre or the job number for which the requisition is being made. 

   The materials requisition note may also have a column, to be filled in by the cost department, for recording the cost or value of the materials issued to the cost centre or job.

2. Materials returned note

   This is used to record any unused materials which are returned to stores.

3. Materials transfer note

   This document is used to transfer materials from one production department to another.