Ingredients of closing stock

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llllVICTORllll (Querist)
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09 August 2012 A Company(accounting under SAP environment) wanting to keep strict control over all the material moving in and out of company is issuing purchase order for everything. i.e for Raw materials, Consumables, Staff welfare items like soaps, medicines, refreshments) repair and maintanance items(such as cements, wiring, bricks etc which may or maynot be consumables towards final product), and all material coming in are accounted to MIGO and MIRO. Now Once the material is MIGOed it will be part of stock of material and the same is written off later as consumption(say within a week).

My Doubt is could company do that? Is there any need to maintain such strict control on non production materials too

If yes, wouldn't it skew or imbalance the profit and loss account by mixing items not related to production into purchase and closing stock?

As Internal Auditor should I insist on changing the practice or could i recommend a better accounting practice?

Rajnish Singh

Rajnish Singh (Expert)
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09 August 2012 Hi Victor,

First of All I would borrow your kind attention on some following basic thing

1 - every transction which make in cash is recordable to company so you should take this in practice which is to make either for consumable item or any other non productionable item

2. your store routine should have very strong therefore your stock present a real pictures.

3. if this type of transction are happen with you guy that is valen good and a very good task infaour of company

4 if you keep record for in and out for non productionable item that increse your stock and that will present a real pictures.

thanks
rajnish

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