Stores control
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This document discusses stores (materials) control. It describes stores as an important current asset and how efficient control helps minimize costs. There are three types of store organizations: centralized, decentralized, and centralized with sub-stores. Centralized stores are controlled from one location while decentralized stores have independent departments. Centralized with sub-stores has a main store and sub-stores. Key aspects of stores control covered include requisitioning, bin cards, stores ledger, issue control, and spoilage. The storekeeper's duties in receiving, storing, and issuing materials are also outlined.
Stores control
- 1. STORES CONTROL DR. MOHAMED KUTTY KAKKAKUNNAN Associate Professor P.G. Dept of Commerce NAM COLLEGE KALLIKKANDY Kannur –Kerala – India
- 2. STORES CONTROL • An important part of material control • Stores (stock) is an important current asset • Stores control helps to minimize material cost, loss due to wastage, theft, misappropriation, deterioration, damage etc. • Efficient and effective control over stores is essential for cost control Stores Department – Entrusted with management and administration of stores
- 3. Types of Stores (Organization of Stores Department) Three types of stores 1. Centralized stores 2. Decentralized stores 3. Central stores with sub-stores
- 4. Centralized stores All materials are received, kept and issued from one stores department (Centralized store) Advantages • Better control over stores • Better layout of stores is possible • Less storage space is required as stores are kept to minimum • Investment in stock is minimized • Economical in many respects • Experts can be appointed
- 5. Disadvantages of Centralized Stores • Increases transportation cost - if the central store is located in distant place or production units lay in different parts • Delay in getting stores • Greater risk of loss in case of fire • Break-down in transportation may affect operations
- 6. Decentralized Stores Independent stores are maintained for different departments Storekeeper in each department handle stores Department requiring the materials draw it from their stores. Advantages are the disadvantages of centralized stores Disadvantages are the advantages of centralized stores
- 7. Centralized Stores with Sub-stores • In large factories and organizations, with production facilities or operations in different and distant • A central stores and several sub-stores in different parts • Central stores receive all stores • Issues in large quantities to the sub-stores on the basis of requisition made by the storekeeper of the sub stores • This system is more or less similar to the petty cash system – thus, it is also known as imperest system of stores control
- 8. The Storekeeper The person in charge of stores department, responsible for stores control Must possess proper technical knowledge and skill in materials kept in stores, stores administration and control Duties and responsibilities • Receiving the stores – ensuring receipts are in accordance with the order • Entering all the receipts in the Bin Cards • Keeping every item of stores in the allotted space
- 9. Duties Contd… • Maintaining the stores in an orderly and tidy manner to facilitate easy handling and verification • Ensuring issue of materials is made on the basis of proper documents • Requisitioning for purchase when the quantity of stores reaches at the re-order level • Ensuring optimum level of inventory (not exceed maximum level or go below the minimum level) • Checking bin card balances with the physical quantities • Supervision and control of subordinates • Preventing unauthorized person from entering the stores
- 10. Requisitioning for Stores The store keeper has to ensure proper supply of stores (materials) as and when required by various departments. When the quantity reaches at a particular level, send requisitions for fresh issue or purchase of materials To ensure proper stores control and to eliminate or minimize various costs associated with stores, different stock levels will be calculated.
- 11. STORES (MATERIAL) RECORDS Two important records are maintained in stores A. Bin Card and B. Stores Ledger B I N C A R D A record maintained in the store by the store-keeper showing the quantity of receipt and issue of material A bin card for each item of materials Kept in the store, generally in the bin which contain the material
- 12. Bin Card Preparation (Maintenance) Two columns – for receipt and issue, after each issue and receipt the balance is also shown, an additional columns for order Store-keeper is responsible for difference in the physical quantity of stock and balance shown in the bin card Also known as Bin Tag or Stock Card. May contain different stock levels Helps to assess the balance of material or inventory, without checking the physical quantity
- 13. Double Bin System • The bin or rack or shelf (where the material is kept) will be divided into two parts – • 1. for keeping the minimum quantity of material • 2. for keeping the remaining stock. • In the ordinary case, materials kept in the minimum stock level part will not be issued, so as to maintain the minimum quantity.
- 14. STORES LEDGER • A record maintained by the Costing Department, which shows the receipt, issue and balance of material in the store in terms of both quantity and values. • Like bin card, there will be a stores ledger for each material
- 15. Differences between Bin Card and Stores Ledger Bin Card Stores Ledger Records quantity only Records both quantity and values Maintained by store-keeper Costing Department Posted before the transaction Always posted after transaction Each transaction is individually posted Transactions may be summarized and posted Usually kept inside the store Kept outside the store
- 16. Need for Bin Cards (are bin cards necessary?) Two records – (bin card and stores ledger) serve the same purpose, duplication of work – no need for bin cards Necessary due to the following reasons • Storekeeper is responsible for maintenance of stores, thus, he should have a record of movement of stores • Responsible for difference in physical quantities, helps to frequent check • Entries are made before or immediately after the transaction, provides up-to-date information on balance • Bin cards and stores ledger facilitate cross check of issues, receipts and balance of materials
- 17. ISSUE CONTROL Materials are - • kept in the store for issuing to different jobs, process, etc as and when required • issued by the storekeeper on the basis of proper requisition made by the responsible person Material Requisition: A requisition made by the responsible person (foreman, Production manager etc) for issue of materials required with quantities. • Kept as a document by the store keeper • Material are issued only on the basis of material requisition. Authorization for issue
- 18. Bill of Materials • Is a complete list of all materials required with quantities for a particular job, process or order • A single document and serves the same purpose of different material requisitions to be made for different materials to be used for a job, process, or order
- 19. Surplus or Excess Materials May be returned or transferred to another job, process or order Material Returned Note ( Stores Debit Note / Shop Credit Note) is prepared by the department when the surplus material is returned to the store. Triplicate – on receipt of the returned material, store keeper signs the note and one is kept with him, one copy is send to the returned department and another is send to the costing department Discourage transfer - chances for misappropriation, fraud, wastage etc. Allow on the basis of proper Material Transfer Note. Prepared by the department with excess material
- 20. Material Abstract An analytical statement prepared periodically on the basis of the various material requisition notes, returned notes and transfer notes. • Shows the value of materials consumed in each job at a glance. • Shows the total amount of material to be debited to each job and overheads.
- 21. Spoilage -refers to the production that does not meet the dimensional or quality standards in such a way that it cannot be rectified economically and is junked (debris) and sold for a disposal value Treatment of spoilage Cost of normal spoilage is bone by good units of output Cost of abnormal spoilage is transferred to costing profit and loss account