8/6/2019 Cost Recording

1/5

COST RECORDING:

MATERIALS:

Materials are the production supplies/resources of an organizationthat features as revenue expenditure purchase from third party. Thepurchase resources will be used to manufacture the product that an

organization ultimately sell to generate revenue.Material can be classified as Direct and Indirect Material.

Direct Material :

Indirect Material: .

Note: Materials are not necessarily *raw materials, but can includecomponents and sub-assemblies (WIP) used in the financial product.

8/6/2019 Cost Recording

2/5

PROCEDURE FOR PURCHASE OF

MATERIALS:PURCHASE REQUISITION: It is a formal request for the purchase of materials It can be raised by store staff, someone in the

department using the materials or may begenerated atomically by computer system whenthe level of stock gets down to pre-specified re-order level.

It must be approved by an appropriate person,such as store manager by means of signature onthe form

8/6/2019 Cost Recording

3/5

PURCHASE ORDER: It is a formal request send to suppliers for the purchase of

goods. Large organization usually have buying department, whose

job is to process authorized purchase requisition and placepurchasing order with suppliers.

Before placing any order buying department will assess thepurchase requisition once again and it can also amend therequirement.

A responsibility of selection of suppliers lies to buyingdepartment and the selection will be based on price,delivery promise, quality, past history, discount, promotedelivery etc.

8/6/2019 Cost Recording

4/5

G OODS RECEIVING DEPARTMENT: G oods are received in goods receiving department or area. When the goods are received from suppliers, the suppliers

provide a delivery note (this is suppliers documentspecifying goods have been delivered). A copy is signed bythe receiver and returned to the suppliers. Before signingdelivery note receiver will inspect the goods in terms of quantity, quality, purchase order and check delivery noteto see it agree with the physical goods in terms of quantityand description.

If receiver gets satisfied with the above explainedcondition, then goods receiving department will sign thedelivery note and raise G OODS RECEIVED NOTE (G RN).

8/6/2019 Cost Recording

5/5

NB: if the acutual goods can not ne inspectedimmediately, the delivery note should be signed

SUBJECT TO INSPECTION.A G RN is a form completed by the receipants of ordered goods confirming the specification of thegoods received. The form includes a descritption

of the goods, the quality, the coomodity code,the date received and the number of the order.A copy of grn would be sent to buyingdepratment to match with purchase order. To

ensure that the correct number and specificationof items have been recived.A copy of G RN along with opurchase order would