INVENTORY & PRODUCTION CYCLE
1. PLACING OF ORDERS
2. RECEIPT OF GOODS (RMs)
PURCHASES & PAYMENTS CYCLE
PURCHASES & PAYMENTS CYCLE 3. STORING OF RMS
PURCHASE REQUISITION
GOODS RECEIVED NOTE (GRN)
(informs the purchasing department what goods are needed)
• A pre-numbered purchase requisition made out by the • There should be a separate demarcated area for • RMs must be stored & protected until required in
production/factory manager (when goods are needed in receiving goods production
two-fold approved & signed by the head store manager • Two receipt clerks must receive the delivered inventory • Stock should be barcoded onto the perpetual inventory
• Details: description, amount, date & dept. • The supplier’s delivery note must be signed after the system
• Copies: following have been done: (QQD) o To ensure physical stock can be checked against
o Purchasing division- in order to request the goods o Details: on the delivery note from the supplier theoretical stock on a frequent basis (weekly) &
o Own records – as proof of goods requested must be compared with the delivered items & the there is a tracking system
• A purchasing clerk must prepare purchasing orders on a details on the purchasing order o The system should record: serial number, title,
prenumbered purchasing order o Goods that have not been ordered may not be director, description ß for smaller items
• Only a purchasing clerk may prepare purchasing orders if received • All RMs purchased & received must be stored &
he has received a purchasing requisition, signed by the o Quality aspects of the goods must be reviewed protected until needed in the production process, the
head storeman • The two receipt clerks must take out a prenumbered goods should be stored as follows:
• Purchasing orders must be prepared according to a list goods-received note (GRN) of which the details must o Stored in a separate isolated area
of approved suppliers agree with the supplier’s delivery note & the physical o Access to the material must be limited (only one
• If no satisfactory supplier, purchasing clerk must get goods received entrance from within the shop)
quotations before preparing the order • 6 Copies of the GRN should be generated: o Any doors or windows from the outside must be
• The purchasing manager must approve the purchasing o Accounting division - agreement with the invoice secured
order after has agreed the details with the approved & purchasing order o The shop must have security gate at the entrance
requisition & suppliers & he must sign o Accompanies the goods to the inventory store so that it only opens with a press of a button
• Purchasing orders exceeding a certain amount must also o Purchasing division – for comparison with located at the cashier’s counter. It must also have
be approved by the financial manager & signed outstanding purchasing orders an alarm system
• 5 copies of purchasing orders should be made: o Inventory clerk – for updating the inventory o The shop must be protected against fires & there
o Accounting division – agreement with the invoice records must be fire extinguishers & sprinklers on the
o Head storeman – to update list of outstanding o Own records – file with purchasing order to show premises
requisitions that order has been received o Authorised & signed documentation (requisition)
o Receipts division – ensure that only goods have o Supplier – if supplier has not provided a delivery required for the movement of the RMs.
been ordered are accepted note
o Supplier – to place the order • Goods received must be placed in safekeeping
o Own records – As evidence that the order has immediately
been placed • The receipt clerks must perform sequence checks &
• Outstanding purchase orders must be kept in a suspense follow up on all outstanding orders
file in the purchasing division & followed up regularly all • The inventory records must then be updates to record
orders are finalised timely new stock (RMs)
, 4. PRODUCTION CYCLE
b. Receipt of invent at c. Physical control over the inventory at the
a. Issuing Inventory from the central inventory WH to the branches:
branches branches
• Branch managers/manufacturing clerk must place an order at the central inventory • The branch managers • The branch manager must keep records of the
WH by making use of a pre-printed standard RM requisition (order form) must be responsible inventory on hand. These records must be updated with
• The RM requisition must be prepared in triplicate: for the receipt of the the issue note & sales invoice
o RM WH – to prepare the correct quantity & type of product for dispatching & inventory items from • The branch manager & sales assistant must frequently
to update their records regarding the movement of inventory the central WH hold inventory counts on a sample basis & compare the
o Accounting department – to update inventory records • With receipt the counted inventory per item with the quantity according
o Branch/ WH – as evidence of quantity & type of product requested branch manager must: to the inventory records
§ Must be pre-numbered, Contain the date of request, Authorised o Compare the • The internal auditor must perform inventory counts at
quality & the branches on a surprise basis & must compare the
signature of the branch manager, Indicate the branch name, Accurately
quantity of the physical inventory with the inventory records. The
explicate the quantity & description of the product
items with the branch managers must be held liable for any shortages
• The WH assistant at the central WH prepares the items for issuing to the issue note & • The storeroom of each branch must only have an
branch/factory on the basis of the RM requisition & completes a RM transfer note order form entrance from within the shop. Any doors or windows
(issue note) for the materials/products that must be issues o Initial/sign as must have security gates.
• A RM transfer note should be prepared in triplicate: evidence that it • Staff must have access to the storeroom, but it is very
o Branch/factory together with the items – branch can be sure of the quantity & has been important that staff make sure that no delivery people
type of materials issued to them checked & go into the storeroom
o Held at central WH – evidence of quantity & type of … issued to the branch corresponds • The shop must be protected against fires & have a
o Accounting Dept – after delivery in order to update inventory records. Copy • If there are any security gate with an alarm system
also serves as proof of delivery deviations between • Sales assistants must count the amount of items clients
§ Contain dispatching date; Must be pre-numbered; Contain the the physical items & want to buy & that they come out with the right
authorised signature of the WH reviewer after he compared it with the the documentation, it amount
order form received; Indicate branch name; QQD must be recorded on • The layout of the shop must be designed so that clients
• With dispatch, the security guard/head store manager must compare the items being the issue note a& must walk past the cashier before they leave
sent with the RM transfer note & must not allow that any items leave the premises signed by both the • A security guard must be appointed & all clients’
that do not appear on the documentation & sign as evidence from doing so deliverer & branch purchases must be compared with the cash register slip
• Daily basis – the WH reviewer of the central WH must check that all RM transfer manager & sales invoice before they may leave the shop
notes refer to & are supported by a valid authorised RM requisition • The branch manager • The staff’s packages must be examined when they leave
must keep the issue they do not walk out with inventory items
• Branch/production managers must compare their duplicate RM requisition with the
note & file it with the
RM transfer notes received with delivery on a daily basis
order form
• The WH reviewer & the branch/production managers respectively must review the
number sequence of RMs requisition & RM transfer notes & followed up on missing
numbers
, 5. TRANSFER TO FINSIHED GOODS STORE
a. Finished Goods Transfer b. Stock Records c. Cost System d. Determination & e. Additional (for that of a
Note Calculation of perpetual system)
production costs of
finished goods
• Record transfer of • Inventory records should • Unit costs determined by • Production reports • The stock should be barcoded
manufactured goods from be updated to reflect the a variety if methods (made up of the rather than maintaining A4 pieces
the production division to transfer by an o Processing costing calculations within them) of paper
the finished goods store independent accounting o Job costing provide information • The barcoded physical stock must
• A pre-numbered finished personal (accountant) o Standard costing concerning amount of be checked against the theoretical
goods transfer note must o Finished goods • Each method requires raw materials used in stock on a frequent basis (Weekly)
be issued in 3 fold by one should increase different ways of production, labour & have a tracking system, by the
of the production foremen o Work in Progress accumulating costs & required to produce sales assistant / branch managers
& must be authorised & decreases unit cost calculations goods, & allocation of • There should be a designated
signed by the production overheads accountant that should be
manager • Production cost will employed to keep record & update
• Details: depend on the system in the perpetual system, when stock
o The QQD use is received, sold, destroyed, etc.
o Date • Calculation of production This person should not have
o Department sent to costs must be checked & access to the stock
• Copies: authorised (signed) by • The re-order level should be put
o Finished goods store management into the system so that stock can
(whilst accompanying be reordered when the levels are
the goods) - can too low
match to the physical • There should be frequent stock
goods received counts, this must be done in
o Own records (factory) conjunction with an independent
-proof that the goods person & shortages/surpluses
have been transferred must be reported to the general
o Accounting manager for further investigation.
department - to The GM must also perform regular
update inventory surprise stock takes
records
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through EFT, credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying this summary from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller Sashti. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy this summary for R400,00. You're not tied to anything after your purchase.
