Cyclopedia of Commerce, Accountancy, Business Administration, v. 02 (of 10)

by American School of Correspondence

STORES RECORDS

23. The installation of a stores-record system calls for the exercise of judgment of the highest order, for the record of material and supplies is of no less importance than the record of cash. As has already been stated, material should be accounted for with the same fidelity as cash; a dollar's worth of material should be regarded as a dollar in gold.

The stores record system should be an integral part of the accounting system of a business; it should be checked as carefully as any account in the ledger. Only by making the stores record a part of the accounting system can it be operated successfully.

Fig. 24. Special Departmental Requisition for Material

Stores records may be divided into two classes—one recording both quantities and values, and one recording quantities only. Frequently both classes are used in one establishment. In the storeroom a system is maintained which records quantities without prices; in the cost department a record of values and quantities may be kept.

The records kept in the storeroom are primarily intended to show quantities on hand, or rather quantities that should be on hand. Sometimes these records show prices, but there appears to be no good reason why this should be done. It is better to have all accounting of values done in the accounting department.

The records under consideration are those of the storeroom. These records must show quantities received and quantities issued, from which a record of the quantity on hand can be obtained. To supply the necessary information, the records must show quantities of each article or kind of material in stock, which necessitates a system of units. Some articles will move much more rapidly than others; therefore, a bound book is not practical. Either cards or loose leaves can be used successfully, a card or sheet being used for the record of each article.

In order that the records may be instantly available, they must be properly classified. The classifications should follow the same lines as the ledger accounts, which will correspond with the classifications adopted in recording the original inventory. Records of material and supplies should be separated, and each divided into classes. The cards or loose leaves should be filed and indexed according to these classifications.

For example, we will suppose that one division of the material account is hardware. On one index will be written the word Hardware, the index forming a main division. Back of the index all cards or sheets recording articles that come in the hardware classification will be filed, these records also being properly classified and subdivided. In the hardware stock will be found screws of several classes, as round-head bright, round-head blued, flat-head bright, flat-head blued. In the S section, back of Hardware, one index will be headed Screws. This division will be subdivided by indexes headed with the names of the classes or kinds of screws. The stores record cards or sheets will then be filed back of these subdivision indexes in the order of sizes. A card or sheet may be used for each size, or several sizes may be recorded on the same sheet.

24. Verification of Stores Records. When indexed in this manner the stores record of any article can be quickly located, and the sectional divisions will assist greatly in verifying the records. While the stores records are intended merely as records of material in stock, their accuracy must be verified by an actual inventory, just as the cash account is verified by a count of cash on hand. However, if thoroughly classified, it is not necessary to verify all of the stores records at one time; they can be verified by sections, or the record of a single article can be verified by an article inventory, without regard to other records.

Accounts in the ledger should be arranged to correspond with the stores classifications, that is, purchase accounts should be carried with materials forming the main divisions of the stores records; as Hardware, Bar Steel, Foundry Material, Foundry Supplies, and Factory Supplies. When the stock of one class, as hardware, is inventoried, the result should be recorded on the regular inventory sheet, priced, and extended, and the total compared with the hardware purchase account in the ledger. Any discrepancies should be adjusted at once, but if the records are carefully kept, and an inventory of each class is taken two or three times a year, the discrepancies should be practically nil.

If the routine prescribed is faithfully followed, there is no theoretical reason why stores records should not check as closely as cash, with the possible exception of bulk stores, like fuel and ores, where estimates are necessary. Even then, if inventories are taken when these stores are at the lowest point, there should be little difficulty in arriving at accurate results. However, the greatest responsibility rests on the chief stores clerk. He must not let a single pound of material leave the storeroom without an order, for it is on the accuracy of his records that all of the accounts are based. The order copies received in the cost department furnish the basis for all material charges. Here prices are entered and extensions are made. The chief cost clerk will transmit to the chief accountant weekly or monthly recapitulations of all material charged out. The chief accountant will credit his purchase accounts and debit Manufacturing, Maintenance, Repair, or Expense accounts as the case may be. Purchase accounts thus become controlling accounts of the stores records, and the latter takes its legitimate place as an integral part of the accounting system.