Page 97 - F2 - MA Integrated Workbook STUDENT 2018-19

Accounting for materials

Inventory control cycle

Inventory often forms the largest single item of cost for a business so it
is essential that the inventory purchased is the most suitable for the
intended purpose. Inventory includes:

 Raw materials or components to be used in the manufacture of products.

 Items that are part way through the manufacturing process (WIP).

 Items that have completed the manufacturing process.

 Items bought to be sold on (retailer or wholesaler).

 Items that will be used for general day to day running of the business.

It is useful to have an overview of the purchasing process:

Production department

– the user of the goods

Issues goods Orders from the
to production stores department
department using a goods
requisition note

Delivers goods to Requisitions goods
stores department Stores department from the purchasing
and submits a department using a
purchase invoice purchase requisition

Orders goods using
External Purchasing
supplier a purchase order department

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