As per the SAP system of accounting the entry should be :
At the time of Receipt of material
Store Inventory A/c------------------------------Dr
To GR-IR A/c
GR-IR A/c---------------------------------------Dr
To Vendor A/c
At the time of consumption of material
Stores Consumed A/c---------------------Dr
To Stores Inventory A/c
But presently we have no SAP implementation for the stores therefore at the time of purchase of stores consumables we are passing the normal journal entry with the assumption that all the stores items will be consumed within the quarter end or month end:
Stores Consumed A/c --------------------------Dr
To Vendor A/c
Later on at the end of month or let say at the end of quarter when we are conducting the physical verification of stores consumables than we found that some of the stores itmes are still appearing. Than based on the values of the physical stock we are calculating the value of the material and than we pass following entry in our books because if we don't pass this entry than expenses will be overstated than the actual:
Let say being closing stock at the end of Jan 09
Stores inventory A/c ----------------------Dr
To Stores Consumed A/c -------------------Cr
Again in the 1st day of next month or next quarter we are passing one entry
Stores consumed A/c----------------------------------Dr
To Stores Inventory A/c
The above entry is being passed with the narration that on 1st Feb the closing stock of Jan 09 is being transferred to Feb 09
Whethet the procedure is ok or not. Is there any Accounting standard violation
Pls help me on urgent basis.
Thanks in advance.
Regards
Manish Kumar Joshi
09911138338
CAclubindia
