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INVENTORY MANAGEMENT AND ACCOUNTING

B L Malganya

Business is an economic activity undertaken with the motive of earning profit and to maximize the wealth for the owner. The business activities require resources which are limited! ie material" labour" machineries and others. The success of depend on how efficiently and effectively these resources are managed. The accounts are maintained to answer the two basic questions# a! $hat is the result profit%loss! of business operations& b! what is the position of the resources acquired and used for business purpose& The field of accounting is generally subdivided into# a! b! c! d! Book'keeping (inancial )ccounting *ost )ccounting Management )ccounting

Objective of Accounting The main ob+ective of accounting is to provide financial information to various interested parties. This financial information is normally given via financial statements" which are prepared on the basis of generally )ccepted )ccounting ,rincipals -)),!. a! b! c! d! e! To ascertain the amount of ,rofit% Loss To know the financial position. To provide a records for compliance with laws applicable. To know the progress of the business over the period of time. To disclose information needed by different stakeholders.

Accounting concept an convention a! b! c! d! e! f! g! h! i! +! k! l! Business entity concept Money measurement concept .istorical cost concept -oing concern concept /uel aspect concept The accounting period concept The conservatism concept The realization concept The matching concept The accrual concept The concept of consistency The concept of materiality

Types of accounts ,ersonal account 0eal )ccount 1ominal )ccount Costing

Three -olden rule of accounting /ebit the receiver" *redit the giver /ebit what comes in" *redit what goes out /ebit the expenses 2 losses" *redit the income 2 gains

*ost 3t is measurement" in monetary terms" of resources material" machinery" wages" power etc! used for some purpose. *osting 3t is the process of ascertaining of cost. The cost may have to be ascertained for a product or services or a department or any activity carried out by a business. *ost accounting 3t involves the process of classifying" identifying and recording of expenditure with the intention of ascertaining cost of a cost centre or cost unit for the purpose of cost control *ost accountancy The application of costing and cost accounting principles" methods and techniques to the science" art and practice of a cost accountant for the purpose of cost control and ascertainment of profitability as well as presentation of information for the purpose of managerial decision making. 3nventory control The material is a ma+or component of cost in a manufacturing concern. The control of material refers to the physical flow as well as cost flow. 3t refers to ensure that every items of material is made available at right time" in right quantity" at right price and also with minimum blocking of capital.the control procedure encompass through the functions of material planning" purchasing" stores" material handling with in the factory and production planning" transportaion logistics and usages control