De La Salle University

RVR College of Business

Accountancy Department

ACYCST1
ONLINE LEARNING!
Accounting for Materials Part1

Toppr.com
 Study Objectives

1. Identify the important source documents

used for materials.
2. Discuss and calculate discounts related to
material accounting.
3. Explain direct charging of freight in.
4. Explain indirect charging of freight in.
 Source Documents

a. Materials Requisition Slip

b. Purchase Requisition
c. Purchase Order
d. Receiving Report

Deleon, Jr. M., & Deleon, N. (2016). Cost Accounting, (2016 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Guerrero, P. (2018). Cost Accounting: Principles and Procedural Application, (2018 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Horngren, C., Datar, S. & Rajan, M. (2015). Cost Accounting: A Managerial Emphasis, (15th ed.). Pearson Education, Inc.
 Material Requisition Slip

A written order to the storekeeper to

deliver materials and supplies to the place
designation or to issue the materials to
the person presenting a properly executed
requisition.

Deleon, Jr. M., & Deleon, N. (2016). Cost Accounting, (2016 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Guerrero, P. (2018). Cost Accounting: Principles and Procedural Application, (2018 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Horngren, C., Datar, S. & Rajan, M. (2015). Cost Accounting: A Managerial Emphasis, (15th ed.). Pearson Education, Inc.
 Material Requisition Slip

MATERIAL REQUISITION FORM

DATE ISSUED
DATE REQUESTED 1/05/2019 1/06/2019

APPROVED BY
DEPARTMENT REQUESTING FORMING _____________

REQUISITION NO. 05 ISSUED BY __________________

QUANTITY DESCRIPTION JOB NO. UNIT COST TOTAL

200 Material A 101 P5.00 P1,000

400 Material A 102 P5.00 P2,000
300 Material A 103 P5.00 P1,500

TOTAL COST P4,500

Deleon, Jr. M., & Deleon, N. (2016). Cost Accounting, (2016 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Guerrero, P. (2018). Cost Accounting: Principles and Procedural Application, (2018 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Horngren, C., Datar, S. & Rajan, M. (2015). Cost Accounting: A Managerial Emphasis, (15th ed.). Pearson Education, Inc.
 Purchase Requisition

It is a written request, usually sent to inform the

purchasing department for materials and supplies.

Two copies are made:

• Store room clerk - (who requested the purchase
order) to keep track of the orders placed.
• Purchasing department – (original copy) - to place the
order.

Deleon, Jr. M., & Deleon, N. (2016). Cost Accounting, (2016 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Guerrero, P. (2018). Cost Accounting: Principles and Procedural Application, (2018 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Horngren, C., Datar, S. & Rajan, M. (2015). Cost Accounting: A Managerial Emphasis, (15th ed.). Pearson Education, Inc.
 Purchase Requisition

SOUTHERN CONSOLIDATED COMPANY

PURCHASE REQUISITION

Department or individual making the request Forming Department

ORDER DATE 1/1/2019 DELIVERY DATE REQUESTED 1/3/2019

QUANTITY DESCRIPTION UNIT PRICE TOTAL

600 UNITS Material A P5.50 P3,300

TOTAL COST P3,300

APPROVED BY __________________

Deleon, Jr. M., & Deleon, N. (2016). Cost Accounting, (2016 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Guerrero, P. (2018). Cost Accounting: Principles and Procedural Application, (2018 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Horngren, C., Datar, S. & Rajan, M. (2015). Cost Accounting: A Managerial Emphasis, (15th ed.). Pearson Education, Inc.
 Purchase Order
It is a written request to a supplier for specified goods
at an agreed upon price.
• Purchasing department - to maintain a file of all
purchase orders issued.
• Supplier – (original copy) to place an order.
• Receiving department - alert them to expect a
delivery

Deleon, Jr. M., & Deleon, N. (2016). Cost Accounting, (2016 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Guerrero, P. (2018). Cost Accounting: Principles and Procedural Application, (2018 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Horngren, C., Datar, S. & Rajan, M. (2015). Cost Accounting: A Managerial Emphasis, (15th ed.). Pearson Education, Inc.
 Purchase Order

SOUTHERN CONSOLIDATED COMPANY

NOVALICHES , QUEZON CITY

SUPPLIER Eler Company ORDER DATE 1/2/2019

Cubao, Quezon City DATE REQUESTED BY 1/3/2019

DELIVERY TERMS FOB Destination PAYMENT TERMS N/30

QUANTITY DESCRIPTION UNIT PRICE TOTAL

600 UNITS Material A P5.50 P3,300

TOTAL COST P3,300

APPROVED BY __________________

Deleon, Jr. M., & Deleon, N. (2016). Cost Accounting, (2016 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Guerrero, P. (2018). Cost Accounting: Principles and Procedural Application, (2018 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Horngren, C., Datar, S. & Rajan, M. (2015). Cost Accounting: A Managerial Emphasis, (15th ed.). Pearson Education, Inc.
 Receiving Report

When the goods that were ordered are delivered,

the receiving department will unpack and count them.
• Receiving department – kept the original copy.
• Purchasing department - to indicate the order was
received.
• Storeroom clerk - to give notice that the goods
arrived.

Deleon, Jr. M., & Deleon, N. (2016). Cost Accounting, (2016 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Guerrero, P. (2018). Cost Accounting: Principles and Procedural Application, (2018 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Horngren, C., Datar, S. & Rajan, M. (2015). Cost Accounting: A Managerial Emphasis, (15th ed.). Pearson Education, Inc.
 Receiving Report

SOUTHERN CONSOLIDATED COMPANY

NOVALICHES , QUEZON CITY

SUPPLIER Eler Company

PURCHASE ORDER NO. 015

DATE RECEIVED 1/03/2019

QUANTITY DESCRIPTION DISCREPANCIES

600 Material A none

AUTHORIZED SIGNATURE __________________________

Deleon, Jr. M., & Deleon, N. (2016). Cost Accounting, (2016 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Guerrero, P. (2018). Cost Accounting: Principles and Procedural Application, (2018 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Horngren, C., Datar, S. & Rajan, M. (2015). Cost Accounting: A Managerial Emphasis, (15th ed.). Pearson Education, Inc.
Special Problem in Material Accounting: Discounts

1. Quantity Discounts
2. Cash Discounts:
a. When Taken Method (Gross Method)
b. When Not Taken Method (Net Method)
 Special Problem in Material Accounting: Discounts

1. Quantity Discounts – represent cost savings for volume

purchases. Like trade discounts, quantity discounts are not
given explicit accounting recognition in the books.

2. Cash discounts - granted to customers to motivate them to

pay promptly.
a. When taken method – purchases and liabilities are recorded at
gross amounts at the time of purchase. The discount is only
recognized when the account is paid within the discount period.

b. When not taken method – purchase and liabilities are recorded

at net at the time of purchase; when payment is made after the
lapse of the discount period, the discount not availed of is
charged to a “ material “ account.

Deleon, Jr. M., & Deleon, N. (2016). Cost Accounting, (2016 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Guerrero, P. (2018). Cost Accounting: Principles and Procedural Application, (2018 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Horngren, C., Datar, S. & Rajan, M. (2015). Cost Accounting: A Managerial Emphasis, (15th ed.). Pearson Education, Inc.
 Special Problem in Material Accounting: Discounts

Example:
The JJ Company purchased materials listed at P40,000;
terms, 2/15, n/30 on September 1.

Assume payment as follows:

i. Full payment is made on September 14.
ii. Full payment is made on September 30.

Requirement:
Entries to record the purchase and payments assuming
taken and not taken method is used.

Deleon, Jr. M., & Deleon, N. (2016). Cost Accounting, (2016 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Guerrero, P. (2018). Cost Accounting: Principles and Procedural Application, (2018 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Horngren, C., Datar, S. & Rajan, M. (2015). Cost Accounting: A Managerial Emphasis, (15th ed.). Pearson Education, Inc.
 Special Problem in Material Accounting: Discounts

a) When taken method (Gross) is used:

Sept. 1 Materials 40,000

Accounts payable 40,000

Sept. 14 Accounts payable 40,000

Materials 800
Cash 39,200

Sept. 30 Accounts payable 40,000

Cash 40,000

Deleon, Jr. M., & Deleon, N. (2016). Cost Accounting, (2016 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Guerrero, P. (2018). Cost Accounting: Principles and Procedural Application, (2018 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Horngren, C., Datar, S. & Rajan, M. (2015). Cost Accounting: A Managerial Emphasis, (15th ed.). Pearson Education, Inc.
 Special Problem in Material Accounting: Discounts

b) When not taken method (Net) is used:

Sept. 1 Materials 39,200

Accounts payable 39,200

Sept. 14 Accounts payable 39,200

Cash 39,200

Sept. 30 Accounts payable 39,200

Materials 800
Cash 40,000

Deleon, Jr. M., & Deleon, N. (2016). Cost Accounting, (2016 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Guerrero, P. (2018). Cost Accounting: Principles and Procedural Application, (2018 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Horngren, C., Datar, S. & Rajan, M. (2015). Cost Accounting: A Managerial Emphasis, (15th ed.). Pearson Education, Inc.
 Special Problem in Material Accounting: Freight-In

1. Direct Charging (include in raw materials):

a. Relative Peso Value Method
b. Relative Weight Method
2. Indirect Charging (included in factory
overhead).

Deleon, Jr. M., & Deleon, N. (2016). Cost Accounting, (2016 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Guerrero, P. (2018). Cost Accounting: Principles and Procedural Application, (2018 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Horngren, C., Datar, S. & Rajan, M. (2015). Cost Accounting: A Managerial Emphasis, (15th ed.). Pearson Education, Inc.
 Special Problem in Material Accounting: Freight-In

1. Direct Charging – the freight incurred on the purchase of raw

materials is ADDED to the invoice price. The account debited for
the freight is Materials. The effect is an increase in the unit
cost. If two or more materials are purchased and delivered at
the same time, the freight must be allocated using the following
methods:
a) Relative peso value method - freight is allocated on the basis of
the peso value of the times purchased. This is used for materials
purchased and expressed in different terms of measurement.
b) Relative weight method – freight is allocated on the basis of the
weight of the items purchased.

2. Indirect Charging – the freight incurred on the purchase of raw

materials is charged to Factory Overhead Control Account.

Deleon, Jr. M., & Deleon, N. (2016). Cost Accounting, (2016 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Guerrero, P. (2018). Cost Accounting: Principles and Procedural Application, (2018 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Horngren, C., Datar, S. & Rajan, M. (2015). Cost Accounting: A Managerial Emphasis, (15th ed.). Pearson Education, Inc.
 Special Problem in Material Accounting: Freight-In

Example:
An invoice for raw materials A, B and C is received from the
Nueva Corporation. The invoice totals are: A – P25,000; B –
P15,000; C – P10,000. The freight charge on this shipment
weighing 8,000 pound is P1,500. Shipping weights for the
respective materials are 5,000, 2,000 and 1,000, respectively.

Required:
1. Entry to record the purchase of materials and the freight using:
a. Direct charging method
b. Indirect charging method

2. The cost per pound to be entered in the materials ledger cards

for A, B, and C, if freight is allocated using:
a. Relative peso value method
b. Relative weight method

Deleon, Jr. M., & Deleon, N. (2016). Cost Accounting, (2016 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Guerrero, P. (2018). Cost Accounting: Principles and Procedural Application, (2018 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Horngren, C., Datar, S. & Rajan, M. (2015). Cost Accounting: A Managerial Emphasis, (15th ed.). Pearson Education, Inc.
 Special Problem in Material Accounting: Freight-In

a) Direct charging method:

Materials 51,500
Accounts Payable 51,500

b) Indirect charging method:

Materials 50,000
Factory Overhead Control 1,500
Accounts Payable 51,500
 Special Problem in Material Accounting: Freight-In

a. Relative peso value method:

Material Invoice Percentage Share in Total Cost per

freight cost pound
A 25,000 3% 750 25,750 5.15
B 15,000 3% 450 15,450 7.725
C 10,000 3% 300 10,300 10.30
50,000 1,500 51,500

1,500 / 50,000 = 3%

Deleon, Jr. M., & Deleon, N. (2016). Cost Accounting, (2016 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Guerrero, P. (2018). Cost Accounting: Principles and Procedural Application, (2018 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Horngren, C., Datar, S. & Rajan, M. (2015). Cost Accounting: A Managerial Emphasis, (15th ed.). Pearson Education, Inc.
 Special Problem in Material Accounting: Freight-In

b. Relative weight method:

Material Weight Freight Share in Total cost Cost per

(pounds) per freight pound
pound
A 5,000 0.1875 937.50 25,937.50 5.1875
B 2,000 0.1875 375.00 15,375.00 7.6875
C 1,000 0.1875 187.50 10,187.50 10.1875
8,000 1,500 51,500

1,500 / 8,000 = 0.1875

Deleon, Jr. M., & Deleon, N. (2016). Cost Accounting, (2016 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Guerrero, P. (2018). Cost Accounting: Principles and Procedural Application, (2018 ed.). GIC Enterprises & Co., Inc., Manila, Philippines.
Horngren, C., Datar, S. & Rajan, M. (2015). Cost Accounting: A Managerial Emphasis, (15th ed.). Pearson Education, Inc.
 Accounting for Materials Part1
Reference and Thanks to:
Deleon, Jr. M., & Deleon, N. (2016). Cost Accounting, (2016 ed.).
GIC Enterprises & Co., Inc., Manila, Philippines.

Guerrero, P. (2018). Cost Accounting: Principles and Procedural

Application, (2018 ed.). GIC Enterprises & Co., Inc., Manila,
Philippines.

Horngren, C., Datar, S. & Rajan, M. (2015). Cost Accounting: A

Managerial Emphasis, (15th ed.). Pearson Education, Inc.