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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

Stores department

External Purchasing
supplier department

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