Job costing is a method of costing in which cost of each job or work is ascertained separately, each job or work order is different from others . Each job is treated as a cost unit and cost is ascertained separately.
example: printing work, engineering work , repair shop, machine tool, automobile garage etc.
it is also called production order costing or specific order costing.
The record of stores may be maintained in three forms:
Bin Cards
Stock Control Cards
Store Ledger
Bin Cards: It is a quantitative record of inventory which shows the quantity of
inventory available in a particular bin. Bin refers to a box/ container/ space where
materials are kept. Card is placed with each of the bin (space) to record the
details of material like receipt, issue and return. It is maintained by store
department.
Stock Control Cards: It is also a quantitative record of inventory maintained by
stores department for every item of material. In other words, it is a record which
shows the overall inventory position in store. Recording includes receipt, issue,
return, in hand and order given.
Advantages and Disadvantages of Bin Cards
Advantages:
(i) There would be fewer chances of mistakes being made as entries are made
at the same time as goods received or issued by the person actually
handling the materials.
(ii) Control over stock can be more effective, in as much as comparison of the
actual quantity in hand at any time with the book balance is possible.
(iii) Identification of the different items of materials is facilitated by reference to
the Bin Card the bin or storage receptacle.
Disadvantages
(i) Store records are dispersed over a wide area.
(ii) The cards are liable to be smeared with dirt and grease because of
proximity to material and also because of handling materials.
(iii) People handling materials are not ordinarily suitable for the clerical work
involved in writing Bin Cards.
Advantages and disadvantages of Stock Control Cards
Advantages:
(i) Records are kept in a more compact manner so that reference to them is
facilitated.
(ii) Records can be kept in a neat and clean way by men solely engaged in
clerical work so that a division of workers between record keeping and
actual material handling is possible.
(iii) As the records are at one place, it is possible to get an overall idea of the
stock position without the necessity of going round the stores.
Disadvantages:
(i) On the spot comparison of the physical stock of an item with its book
balance is not facilitated.
(ii) Physical identification of materials in stock may not be as easy as in the case
of bin cards, as the Stock Control Cards are housed in cabinets or trays.
Stores Ledger: A Stores Ledger is maintained to record of both quantity and
cost of materials received, issued and those in stock. It’s being a subsidiary
ledger to the main cost ledger, it is maintained by the Cost/ Accounts
Department. The source documents for posting the ledger are Goods received
notes, Materials requisition notes etc.
The first two forms are records of quantities received, issued and those in
balance, but in the third record i.e. store ledger, value of receipts, issues and
closing balance is also maintained. Usually, records of quantities i.e. Bin cards and
Store Control Cards are kept by the store keeper in store department while record of
both quantity and value is maintained by cost accounting department.
Proper storing of materials is of primary importance. It is not enough only to
purchase material of the required quality. If the purchased material subsequently
deteriorates in quality because of bad storage, the loss is even more than what
might arise from purchase of bad quality of materials. Apart from preservation of
quality, the store-keeper also ensures safe custody of the material. It should be
the function of store-keeper that the right quantity of materials always should be
available in stock.
2.5.1 Duties of store keeper
These can be briefly set out as follows:
(i) General control over store: Store keeper should keep control over all
activities in Stores department. He should check the quantities as mentioned in
Goods received note and with the purchased materials forwarded by the receiving
department and to arrange for the storage in appropriate places.
(ii) Safe custody of materials: Store keeper should ensure that all the
materials are stored in a safe condition and environment required to preserve the
quality of the materials.
(iii) Maintaining records: Store keeper should maintain proper record of
quantity received, issued, balance in hand and transferred to/ from other stores.
(iv) Initiate purchase requisition: Store keeper should initiate purchase
requisitions for the replacement of stock of all regular stores items whenever the
stock level of any item of store approaches the re-order level fixed.
(v) Maintaining adequate level of stock: Store keeper should maintain
adequate level of stock at all time. He/ she should take all necessary action so
that production could not be interrupted due to lack of stock. Further he/ she
should take immediate action for stoppage of further purchasing when the stock
level approaches the maximum limit. To reserve a particular material for a specific
job when so required.
(vi) Issue of materials: Store keeper should issue materials only against the
material requisition slip approved by the appropriate authority. He/ she should
also refer to bill of materials while issuing materials to requisitioning department.
(vii) Stock verification and reconciliation: Store keeper should verify the book
balances with the actual physical stock at frequent intervals by way of internal
control and check the any irregular or abnormal issues, pilferage, etc.
After the procurement of materials from the supplier actual material cost is
calculated. Ascertainment of cost of material purchased is called valuation of
materials of material receipts. Cost of material includes cost of purchase net of
trade discounts, rebates, duty draw-back, input credit availed, etc. and other costs
incurred in bringing the inventories to their present location and condition.
Invoice of material purchased from the market sometime contain items such as
trade discount, quantity discount, freight, duty, insurance, cost of containers,
taxes, cash discount etc.
Treatment of items associated with purchase of materials is tabulated as below
Material Requisition Note
It is also known as material requisition slip, It is a voucher of authority used to
get materials issued from store. Generally, it is prepared by the production
department and materials are withdrawn on the basis of material requisition list
or bill of materials. If no material list has been prepared, it is desirable that the
task of the preparation of material requisition notes be left to the planning
department or by the department requires the materials. The note is shared with
Store and Cost/ Accounting department.
Format of a Material requisition note may vary on the basis of industrial
peculiarities, management information system (MIS) and accounting system in
place.
The Commerce Lecturer 