Materials Ledger Card–Perpetual Inventory:

As purchased materials go through the systematic verification of quantities, prices, physical condition, and other checks, the crux of the accounting procedure is to establish a perpetual inventory – maintaining for each type of material a record showing quantities and prices of materials received, issued, and on hand.

Materials ledger cards or stock ledger sheets constitutes a subsidiary materials ledger controlled by the materials are inventory accounts in the general ledger or in the factory ledger.

Materials ledger cards commonly show the account number, description or type of material, location, unit measurement, and maximum and minimum quantities to carry. These cards are the materials ledger with new cards prepared and old ones discarded as changes occur in the types of materials carried in stock. The ledger card arrangement is basically the familiar debit, credit, and balance columns under the description of received, issued, and balance. Following is an example of material ledger card:

Example | Sample of materials ledger card:

The approved invoice with supporting documents, such as the purchase order and receiving report, goes to the materials ledger clerk. These documents enable the clerk to make the necessary entries in the received section of the materials ledger card. Each receipt increase the balance on hand and the new balance is extended upon entry of the receipt.

Unsatisfactory goods or defective units should be detected by the inspection department before being stored or even paid for. The receiving report should show materials actually accepted, and the ledger entries are made after all adjustment. However, goods accepted in the storeroom may be found unsatisfactory after part of a shipment has been used in the factory, and the balance may then be returned to the vendor. Since these units were entered in the received and balance section of the materials ledger card when they were placed in the storeroom, an adjustment must be made. The recommended procedure is to enter the quantity and the value of the returned shipment in red in the received section and to reduce the balance accordingly.

When the storekeeper issues materials, a copy of the requisition is sent to the materials ledger clerk, who then makes an entry in the issued section of the materials ledger card showing the date, requesting number, job, lot, or department number, quantity, and cost of the issued materials. The new balance is computed and entered in the balance column. As already explained, these manual operations can be performed in an electronic data process (EDP) system based on the computer program designed for the materials transactions.

You may also be interested in other useful articles from “controlling and costing materials” chapter:

1. Purchases of productive material
2. Purchases of supplies, services, and repairs
3. Materials purchasing forms
4. Receiving materials
5. Invoice approval and data processing
6. Correcting invoices
7. Electronic data processing (EDP)  for materials received and issued
8. Cost of acquiring materials
9. Storage and use of materials
10. Issuing and costing materials into production
11. Materials ledger card – perpetual inventory
12. First-in-First-Out (FIFO) Costing Method
13. Average Costing Method
14. Last-in-First-Out (LIFO) Costing Method
15. Other Methods-Month end average cost, last purchase price or market price at date of issue, and standard cost
16. Inventory valuation at cost or market whichever is lower
17. American Institute of Certified Public Accountant (AICPA) cost or market rules
18. Adjustments for departures from the costing method used
19. Inventory pricing and interim financial reporting
20. Transfer of materials cost to finished production
21. Physical inventory
22. Adjusting Materials Ledger Cards and Accounts to Conform to Inventory Accounts
23. Scrap and waste
24. Spoiled goods
25. Defective work
26. Discussion Questions and Answers about Controlling and Costing Materials

Other Related Accounting Articles:

• Receiving Materials
• Physical Inventory – Inventory Valuation
• Storage and Use of Materials
• First In First Out (FIFO) – Materials and Inventory Costing Method
• Electronic Data Processing System (EDP System) for Materials Received and Issued
• Materials Purchasing Forms
• Invoice Approval and Data Processing
• Transfer of Materials Cost to Finished Production–Inventory Valuation
• Other Materials Costing Methods – Month End Average Cost | Market Price at Date of Issue | Standard Cost
• Issuing and Costing Materials into Production