Definition of Raw Materials

Table of contents :

Definition of Raw Materials

Raw Material Purchase Costs

Purchasing System

  • Procedure for Purchasing Requests for Raw Materials
  • Raw Material Acceptance Procedure
  • Procedure for Recording Raw Material Receipt at the Warehouse Section
  • Recording Procedures for Debt That May Arise from Purchasing Raw Materials

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Definition of Raw Materials

Raw material is a material that will be used in making a product where the material is as a whole appears on the product as it is (or is the largest part of the form of the goods)

 

Raw material costs are all costs to be able to obtain up to the ready-to-use materials which include the price of materials, transportation costs, storage or others.

 

Because in one accounting period there are often price fluctuations, the purchase price of raw materials will also differ from one purchase to another.

 

Therefore, the inventory of raw materials in the warehouse has a unit cost of different, even though they are of the same type.

 

This will also cause problems in determining the cost of raw materials to be used in a production.

 

To overcome this problem, various methods of cost of raw materials used in production are also needed (materials costing method), which include:

 

Special identification method.

First in first out method.

Last in first out method.

Moving average method

Standard cost method.

Raw Material Purchase Costs

Accounting for Raw Materials

 

The cost of raw materials (raw material cost) is an overall cost of being able to obtain up to the ready-to-use materials which will include the price of materials, transportation costs, and other storage.

 

Before discussing the elements of costs that will form the cost of raw materials purchased, the following describes the local purchasing system for raw materials.

 

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Purchasing System

The local purchasing system for raw materials consists of a purchase request procedure, a purchase order procedure, a goods receipt procedure, a recording procedure for receiving goods in a warehouse, as well as a debt recording procedure.

 

  • Procedure for Purchasing Requests for Raw Materials

If there is an inventory of raw materials in the warehouse that has reached the minimum reorder point,

 

The warehouse department will then create a purchase requisition which will then be sent to the purchasing department.

 

  • Raw Material Acceptance Procedure

This supplier will send the raw material order to the company in accordance with the purchase order letter it has received.

 

The Receiving Department will be in charge of receiving goods, matching the quality, quantity, type and specifications of raw materials that have been received from suppliers with a copy of the purchase order letter.

 

Then if the raw materials to be received are in accordance with the purchase order letter, the Receiving Department makes a goods receipt report to be sent to the Accounting Department.

 

  • Procedure for Recording Raw Material Receipt at the Warehouse Section

This Acceptance Section submits raw materials that have been received from suppliers to the Warehouse Section.

 

The warehouse department can store these raw materials and also record the amount of raw materials that have been received on the warehouse card.

 

Warehouse Cards are often used by the Warehouse Department to record the mutation of each type of warehouse item.

 

The warehouse card only contains information on the quantity of each type of item to be stored in the warehouse and will not contain information about the price.

 

The cash card records are monitored by the accounting department in the form of certain inventory cards.

 

  • Recording Procedures for Debt That May Arise from Purchasing Raw Materials

Purchasing department receives purchase invoices from suppliers. This purchasing department will give a signature on the purchase invoice,

 

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As a sign of a letter of approval that the invoice can be paid because the supplier has met the purchase conditions specified by the company.

 

Purchase invoice that has been signed by the Purchasing Department will be submitted to the Accounting Department.

 

In this transaction the purchase of raw materials, the accounting department will check the accuracy of the calculations in the purchase invoice and also match them

 

With the information in a copy of the purchase order letter that has been received from the Purchasing Department and also the goods receipt report received from the reception department.

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