MANAGEMENT

ACCOUNTING
MATERIAL - 1
Dr. Manisha Ketkar
Today’s Topics:
 Elements of cost

 Material – Direct and Indirect

 Material Management System

 Procurement and Purchase

 Stores routine and control

Dr. Manisha Ketkar
Pre class home work

Manufacturing Process

https://www.youtube.com/watch?v=b7ZFBL7h0bM

Dr. Manisha Ketkar

Production System

Dr. Manisha Ketkar

Dr. Manisha Ketkar
Inputs for biscuit manufacturing
process
 Sugar, Milk, Flour, Additives, Wrappers, Cartons
 Materials
Material
 Machines, Workers Elements
of cost
 Labour
Expenses Labour
 Moulds, Water, Electricity
 Expense
Dr. Manisha Ketkar
Inventory - Inventory is an accounting term that refers
to material in various stages of being made ready for sale

Dr. Manisha Ketkar

Material - Something which is tangible & inventoried

• Raw materials • Factory supplies

• Components • Glues and nails

Material Labour
• Primary Packaging materials • Small tools
• Partly produced or • Oil and waste
purchased component • Consumable stores

Direct
Indirect • Lubricants Intensive Intensive
Material
Material
Factory Manufacturin
Agriculture,
Mining,
g
Hospitality
Indirect Indirect
Material Material
Sales 80 to 90% of 1 to 20% of
Office total cost total cost
and
• Samples Distribn. • Printing &
• Invoice stationery stationery material
• Promotional material • Brooms & dusters

Dr. Manisha Ketkar

Material Management

Lowest
Sufficient investment
inventory in
inventory

What How
should much
MM
Where Whom
from From

Dr. Manisha Ketkar

Procurement / Purchase

• Vendor selection
Procurement
(Strategic) • Vendor evaluation

Purchase • Request for

(Transactional quotation
) • Purchase orders
Dr. Manisha Ketkar
Why Purchase is important

Quality
improvement

Cost
control and Uninterrupte
cost d flow of
reduction supply

Competitiv
Building
e
relationship
Advantage

Dr. Manisha Ketkar

Purchase

Dr. Manisha Ketkar

Dr. Manisha Ketkar
Storage – Holding material between procurement and
production / sale / consumption

Dr. Manisha Ketkar

Stores Routine and Control
Turnover of
Stores Material
stores
Location Utilization
materials

Centralized v/s Recording – Bin Slow / non moving

Decentralized card, stores ledger / dormant

Physical control –
Protection against Stock taking –
losses by theft, Periodic and Stock levels
fire, handling Perpetual,
Reconciliation

Dr. Manisha Ketkar

16

 Inventory refers to the aggregate of those items

owned by a firm that
a) are held for the purpose of making sales to customers in the
ordinary course of business
b) are in the process of production for such sale
c) are to be currently consumed in the production of goods to
be available for sale
d) all of the above

 Ans: d) all of the above

Dr. Manisha Ketkar

Group Home work on drawing sample material
documents

Dr. Manisha Ketkar

Main Takeaways
 Elements of cost

 Material – Direct and Indirect

 Material Management System

 Procurement and Purchase

 Stores routine and control

Dr. Manisha Ketkar
 Chapter 2 – Direct Materials from e-book COST
ACCOUNTING by V. Rajasekaran and R. Lalitha of
Pearson Publication from SIU Library Portal
 Watch these videos

 Purchase process

https://www.youtube.com/watch?v=LOWj0ZSEHus (5
min)
 Material Documents

https://www.youtube.com/watch?v=SLHJuo9YE-s (14
min)
Dr. Manisha Ketkar
Thank you!
See you in next class

Dr. Manisha Ketkar