Question

Please explain how receiving reports and materials requisitions affect material inventory balances.

Answer 1

Solution :

The question pertains to responsibilites of personnel under purchases-payables-cash disbursements cycle .

Inventory control department based on the preestablished reorder point initiates a requistion as authorization for the purchase.this depatment also provides authorisation for the purchase of goods and performs an accouting function ( maintaining perpetual records for inventory quantities and costs.)

Then after the purchasing department issues purchase order , the receiving departmnet accepts the goods for approved purchases,counts and inspects the goods and prepares the receiving report. A copy of the receiving report is sent to inventory control and then the transaction is posted to the perpetual inventory records and then sent to the Accounts payable department.

For controls to be implemented , the purchase orders, requisitions, receiving reports, payment vouchers, and checks are prenumbered and accounted for.

Material requistions are critical since without a valid requistion the inventory cannot enter into the premises nor a purchase order can be generated.

The receiving reports ascertain the quantity , rate of the inventory that are ordered for . This ensure the physical check of the stock with that was initially accounted for based on the purchase invoice.

If any of these are missing , there could be differences between the book inventory as compared to the physical inventory.

Hence, both the documents are essential for the purchase cycle to be completed and ensure that there all the inventory is recorded in the books and as well as match with the physical stock