Introduction

What is Material? In the industrial sense, materials are inputs to production or manufacturing processes which include raw and processed material, components, parts, assemblies, sub-assemblies, fuels, lubricants, coolants, cleaning agents, and small tools and accessories that may be consumed directly or indirectly.

Codification of Material

Each item of material is identified by a Code Number allotted to it by the Factory concerned. In all accounting documents, the material involved is identified by using the code number consisting of 10 digits. The first 2 digits represent priced vocabulary of Stores Number of the Ledger, the next 4 digits represent the folio Number of the Ledger concerned, and the last 4 digits denote the Sub Number.

Classification of Materials

Materials on

“Stores Charge”

Material on “Production

Charge”

Stock Pile Items

Inventory Items

Material on Stores Charge

• Material on “Stores Charge” are those materials which are held in the custody of Stores Department.

These include:- i. Raw material procured by the factory. ii. Manufactured products including components or

processed material produced in another factory. iii. Matals and Raw Materials for production including

components or processed materials purchased from the market or received from other factories or recovered from unserviceable articles or Deposit Stock.

Contd..

Contd… Material on Stores Charge

v. Tools and Gauges.

vi. General Shop Stores:-

(a) Sundry shop stores e.g. oil, grease, brushes, buckets etc.

(b) Plant stores e.g. Screws, Nuts, Drills, Shores etc.

(c) Packing Materials e.g. Boxes etc.

Material on Production Charge

Materials which are manufactured in the factories for issues to formation like arsenals, depots, other factories, private bodies and firms directly from production sections or which are utilized for further assemblies etc. without being brought on Store Ledger charge.

Stock Pile Items

Strategic item of stores which are very difficult to procure

Reserve of such stores is built up separately in order to meet the demand of production in case of failure of supplies

The purchases are made from the Capital Grant of the Factory.

Separate ledger and Bin Cards are maintained for these items

Accounting is done through “R” Series of vouchers

Inventory Items

►Inventory Stores are items of expensive and quasi-permanent nature such as Office Furniture, Miscellaneous equipments, movable shop fittings etc. These stores are accounted for by the each shop or section. ► The accounting document is the Inventory List. ► All transactions for inventory stores other than those where DNs and RNs are prepared should be operated by “I” Series Voucher.

Material Planning Sheets are to be prepared by the Factory based on production programme and Standard Estimates for the items proposed for procurement. MP Sheets indicate the Net Requirement after taking into account the stock and dues.

MP Sheets play a very important role in Material Management of ordnance factories. A Material Planning Sheet will depict the following and is to be checked by the Local Accounts Office:

Contd..

Material Planning Sheet

• (i) Item description

• (ii) Item code - All items are identified by unique code number.

• (iii) Target for production – if the target programme is for more than one financial year, then the Material Planning Sheet should depict the year-wise target

• (iv) Material estimate for the particular item and/or the quantity required per unit of end store.

• (v) Stock quantity as on the first April of the current Year.

• (vi)Dues in – Both from the private parties and the other factories

• (vii)Work in Progress

• (viii) Material already received in the current financial year till the date of generation of the Material Planning sheet.

Material Planning Sheet

This is a document on which the Store Holder represents his inability to supply a store, when the stock has gone below a predetermined fixed limit, so that arrangements may be made for replenishment.

It shows stock in hand, dues, Work in progress, average consumption, liabilities as on date and requirements to meet liabilities.

Store Holders Inability Sheets (SHIS)

Store Holders Inability Sheets (SHIS)

The quantity of stock existing in the factory as noted on the date of inability sheet is correct.

The qty authorised in standard material estimate per unit of production of end product has been considered to work out the gross requirement as per notified target of production.

The average monthly consumption as noted in SHIS is correct

The figures for ‘dues’, liabilities, WIP are correct

Concurrence/vetting by the financial representatives and date of concurrence/vetting are prominently shown.

Audit of SHIS

Receipts of Material

Raw materials are obtained by the factories by one of the following means:-

(a) Foreign Purchase of Stores

(b) Central Purchase in India through a central authority

(c) Local purchase by the SrGM/GM of Factories

(d) Supplies from other factories

(e) Supplies from other branches of Defence Departments

(f) Supplies from departments other than Defence

Receipts of Material

Flow of Incoming Materials

UNDER INSPECTION PREPARATION REJECTION LETTER AT QC/QA.

PREPARATION OF RT.VR. PREPARATION OF NOMINAL I/VR. FOR

ISSUING REJECTED MATERIALS TO THE CONCERN FIRM

POSTING OF RT. VR.

(TAKING INTO STOCK CHARGE)

If found acceptance

If found rejection

Receipts Voucher Pricing Procedure

• As per the payment amount considering the exchange rate charged on the day of import and postal charges, commission, LC (letter of credit) opening charges etc. Charged by the bankers. (Received from PCA(Fys) linked with LC .

FOREIGN PURCHASE

• As per payment invoice received from respective dad cell (Kolkata/Mumbai/Delhi/Chennai) with commission charged .

CENTRAL PURCHASE

• As per supply order rate LOCAL PURCHASE

• As per OFB price list or priced copy of issue voucher send by the ao of the issuing factory together with the punching medium.

IFD

• As per relevant stock book or priced vocabularies concerned. Receipt From other

branches of Defence Department

• As per priced copies of Issue Voucher received.

Receipt From Departments other that Defence

• Actual cost of production Rt from Production of own Factory

• As per Moving Average Ledger rate Rt by return of surplus of materials from shop

Receipts Voucher Pricing Procedure

Issue of Material

Material is issued by the Stores Section of the factory under proper authority for the following purposes:-

(a) Issues to manufacturing shops

(b) Issues to other factories

(c) Issues to other branches of Defence Department

(d) Issues on payment to other Government Department etc

(e) Issues on account of sale by auction etc

(f) Issues to Private parties/PSU

Pricing of Issue Voucher & Demand Note

Issue to Manufacturing Shop

• All Issues to Manufacturing Shops or Demand Note – Average Ledger Rate.

Issues to other Factories on Issue Vouchers or stock Transfer Notes (ST Note):-

• ALR [In the case of factories located in the same area, provision for common user store is made by one factory. The issue of such stores to other factory will be on stock Transfer Note instead of Issue Voucher]

Issues on Payment to Air Force, Navy, Research and Development Organizations

• ALR [No Departmental Charge will be levied in respect of such Issues]

Pricing of Issue Voucher & Demand Note

Sale Vouchers :-

• Sale Rate

Loss Statement :-

• Average Ledger Rate

Loss of Stores in Transit:-

• Rate at which concerned Receipt Voucher was priced

Issues on Payment from stock i.e. payment Issues

• (a) Average Ledger Rate + (b) Departmental Charges of 5% + (c) An Additional Charge of 5% on the Inclusive Rate of (a) and (b).

Demand Note

The document on which materials are requisitioned by the shops in the factories from the Stores. Only one item

of material can be demanded on one demand note.

Return Note

The document on which Surplus materials or scrap in shops are returned to stores. Only one item of material can be returned on one return note. .

Red Demand Note & Red Return Note

Red Demand Note: Documents (used in Fys working on the except system) on which components are manufactured in a factory and drawn from the initial manufacturing shops for purposes of assembly. The characteristic red colour is used for facility of segregation from the ordinary demand notes..

Red Return Note: Documents on which surplus components drawn on Red Demand Notes are returned to the Component Store.

Issue Voucher

• Different types of Issue Voucher :-

• a) ‘S’ – series regular issue voucher :- It is being prepared by the staff of Store(Issue) group and accounted (posted) in Bin Card and deduct the qty. as mentioned in issue voucher. It is prepared in the case of issue of store from ‘S’-series regular stock of store i.e. from Bin Card.

b)‘N’- series nominal issue voucher:- It is being prepared by the staff of Store(Issue) group and not to be accounted (posted) in PSL. It is being prepared in the following cases:-

i. On returnable issue :-it is being followed When maintenance and some job is to be carried out at outside the factory and loan issue to the sister fy.

ii. On non-returnable issue:- it is being followed when the rejected material is required to be issued to the concern firm & sister fy. It is also being followed in the case of extreme exigency issue when the relevant valid documents are not readily available. Record of such transaction is to be carefully in register and necessary steps are to be taken till all such nominal transaction are regularised.

C) ‘P’- series Production Issue Voucher(PIV):- It is being followed when material is being issued from Production Stock.

D) ‘R’- series Stock Pile Issue:- It is being followed when material is being issued from Stock Pile Stock.

E) ‘M’- series Machinery Issue:- It is being followed when material is being issued from Machinery Stock.

F) ‘D’- series Deposit issue:- It is being followed when material is being issued from Deposit Stock.

CRVs (Certified Receipt Vouchers) IAFZ-2096

Used for stores adjustment when actual stocks are more than the book balances.

When any surplus is found in respect of items not borne in Priced Stock Ledger or Deposit Stock Ledger, Certified Receipt Voucher will be prepared

CIVs (Certified Issue Vouchers) IAFZ-2096

Used for store adjustment when actual stocks are less than book balances.

Moving Average Ledger Rate

A moving Average Ledger Rate should be worked out as and when fresh receipt voucher posted in PSL in respect of each ledger folio. The rate is based on the values of receipts as per receipt vouchers and the opening value divided by the total quantity of fresh receipt voucher and opening quantity. Thus if V1 and V2 be the Opening Value and Value of receipts and Q1 and Q2 be the Opening Quantity and Quantity of fresh receipt voucher –

Moving Average Ledger Rate =

V1+V2 ———— Q1+Q2

• IFD stands for Inter Factory Demand. The stores which are available through Sister Factories are procured by placement of IFD on them. It is an open extract under the category of Type –III Extract . Issuing authority of IFD is Sr.GM/GM of the Factory.

• In ordnance factories I.F.D. is placed by one Sr.GM/GM to

another Sr.GM/GM when the initiating factory needs the assistance of the sister factory.

• After receiving of IFD by Fy. , if materials of IFD are under

production , then Warrants are required to be issued to respective production shop or if materials of IFD are available in Store Stock then ‘S’ series Stock Issue voucher Is required to be prepared to issue the same.

IFD Transaction in Ordnance Factory

• i) IFD No.& Date • ii) Item Description • iii) Qty. • iv) Inspection Authority • v) Name of Initiator factory. • vi) Name of factory to which IFD is placed. There are two types of IFD Supply:- i. Supply from Production (“P” series) ii. Supply from Stock (“S” series)

Available Information in IFD

STORE IN TRANSIT (SIT)

How generated?

• Priced Issue Voucher received from consignor factory accounts office for which Receipt Voucher has not been prepared

Various types of Errors and Reasons for SIT:

• Non-receipt of Issue Vouchers at Factory Management end.

• Discrepancies in quantities and delay in settlement

• Wrong documentation by the supplying factory

• Non-receipt of material at factory side

Contd.... STORE IN TRANSIT (SIT)

Outstanding Assets on account of Store-in-transit (IFD Assets):

• IFD assets lying outstanding due to wrong / under pricing of relevant receipt vouchers which could not be adjusted within the same financial year.

• IFD assets outstanding due to cancellation of consignor‘s issue voucher on account of stores returned by consignee due to rejection, not as per authorized specification etc.

• IFD assets outstanding due to incorrect linking of relevant receipt vouchers.

Primary Documents for Material Accounting

D N

C I V

PSL

A price store Account dealing the Receipts and Issue Transactions from stock in each month under the various heads specified in forms I.A.F (Fac) 15 for Receipts and I.A.F (Fac) 16 for Issues will be prepared by the Material Section and submitted to the costing section for the purpose of posting in the Principal Ledger. For preparing Monthly PSA the schedule for All Receipt and Issue Transactions are prepared by the Accounts Office.

OPENING BALANCE OF THE MONTH

+ RECEIPTS DURING THE MONTH

- ISSUES DURING THE MONTH

= CLOSING BALANCE

Preparation of monthly PSA

ACTIVE STOCK = LAST ISSUE DATE WITHIN 12 MONTHS

SLOW-MOVING = LAST ISSUE DATE > 12 MONTHS AND <36 MTHS

NON-MOVING = LAST ISSUE DATE>=36 MONTHS

SURPLUS STORES = VALUE OF ITEMS DECLARED AS SURPLUS BY FACTORY MANAGEMENT

WASTE/OBSOLETE STORES = VALUE OF ITEMS DECLARED AS WASTE BY FACTORY MGMT.

MAINTENANCE = VALUE OF ITEMS DECLARED AS MAINTENANCE BY FACTORY MANAGEMENT.

STATUS OF INVENTORY AFTER PREPARATION OF PSA & PSL

In the case of all stores for which payments are made/book debits are received/priced copies of issue vouchers are furnished, hundred per cent linking has to be done. Linking consists of two parts.

(A) Linking payments with receipt vouchers. Unlinked items represent payments made for which receipt vouchers are awaited. These are called “Outstanding Assets”.

(B) Linking of Receipt Vouchers with payment made, where the unlinked vouchers represent stores received for which payments are to be made. These are called “Outstanding Liabilities”.

Linking of Asset & Liability

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