ERP Purchase Accounting Entry in Machine Manufacturing Factory / Company

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Quick Summary

This discussion clarifies how to classify various purchase transactions within an ERP system for a machine manufacturing company. It differentiates between direct purchases (items becoming part of the finished product, like screws and welding rods) and indirect expenses (consumables supporting production or maintenance, such as paints, grinding wheels, and lubricants). The advice provided helps accountants correctly allocate these costs for accurate financial reporting.

Elbin

Elbin (Querist)
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08 September 2025 Hello Accounting Experts,

Kindly assist me with the following Purchase transactions entries comes under which head in accounting Direct Purchase or Indirect Expense, in a machine manufacturing company ?

1) Hardware Components Such as Screws, Bolts, Nuts, Fasteners, Washers, Etc.

2) Purchase of Paints, Varnishes, Solvents & Thinners, Etc

3) Millstones, Grindstones, Grinding Wheels, Sand Paper, Etc.

4) Welding Rods / Electrodes

5) Lubricants such as Machine Oils, Gear Oil, Hydraulic Oil, Cutting Oil, Grease, Etc.

Please let me know if you require any additional information from my end.

Your insights & guidance would be greatly appreciated

Thank you for your time & support

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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08 September 2025 Hardware Components such as Screws, Bolts, Nuts, Fasteners, Washers, etc. - These items are typically consumables used directly in the manufacturing process, often classified as Direct Purchase or Raw Materials. They become part of the finished product.

Purchase of Paints, Varnishes, Solvents & Thinners, etc. - These are generally used as consumable supplies for finishing or maintenance. They tend to be considered Indirect Expenses as they support production but are not part of the main materials.

Millstones, Grindstones, Grinding Wheels, Sand Paper, etc. - These are also consumable items used in the manufacturing process for maintenance or finishing and usually fall under Indirect Expenses.

Welding Rods / Electrodes - These are used directly in the manufacturing or assembly process and hence are often classified as Direct Purchase.

Lubricants such as Machine Oils, Gear Oil, Hydraulic Oil, Cutting Oil, Grease, etc. - These are used for machine maintenance and operation, considered Indirect Expenses as they support but do not form part of the finished product.

Elbin

Elbin (Querist)
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16 September 2025 if Lubricants purchases comes machine maintenance should i suppose to deduct tds accordingly ?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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16 September 2025 No. It is goods, not service.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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20 September 2025 Good Luck..

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