Electronic Data Processing System (EDP System) for Materials Received and Issued:

The preceding description of invoice approval and payment was for a manual operation performed by an accounts payable clerk or an invoice clerk.

In an electronic data processing system (EDP system), the computer--to a great extent--replaces the clerk. Upon receipt of the invoice (the source document), the accounts payable clerk enters the account distribution on the invoice. The data are then directly inputted from the invoice to the computer data bank via a terminal device. The data are edited, audited, and merged with the purchase order and the receiving order data, both of which have been stored in the computer data bank. The common matching criterion on all documents in the purchase order number. Quantities, monetary values, due dates, terms, and unit prices are matched. When in agreement, the cost data are entered in the accounts payable computer file with a date for later payment.

The above procedure deals with the accounts payable phase of a purchase transaction. Of equal importance is the need for posting the data in quantities and dollar values to the materials inventory file in the electronic data processing system (EDP system). The information enters the EDP system from either the invoice or the invoice approval form, which would have to include all computer-necessary data. The internal computer program updates the materials inventory file. The withdrawal of materials could also be programmed, so that manual posting to the materials inventory file would be eliminated.

You may also be interested in other relevant articles:

• Purchases of productive material.
• Purchases of supplies, services, and repairs.
• Materials purchasing forms.
• Receiving materials.
• Invoice approval and data processing.
• Correcting invoices.
• Cost of acquiring materials.
• Storage and use of materials.
• Issuing and costing materials into production.
• Materials ledger card--perpetual inventory system.

Materials Costing Methods:

• First-in-First-Out (FIFO) Costing Method
• Average Costing Method
• Last-in-First-Out (LIFO) Costing Method
• Other Materials Costing Methods--Month end average cost, last purchase price or market price at date of issue, and standard cost.

Cost of Materials in Inventory at the end of a Period:

• Inventory valuation at cost or market whichever is lower
• American Institute of Certified Public Accountant (AICPA) cost or market rules
• Adjustments for departures from the costing method used
• Inventory pricing and interim financial reporting
• Transfer of materials cost to finished production
• Physical inventory
• Adjusting Materials Ledger Cards and Accounts to Conform to Inventory Accounts

Costing Procedures for Scrape, waste, Spoiled Goods and Defective Work:

• Cost accounting procedure for scrap and waste
• Cost accounting procedure for spoiled goods
• Cost accounting procedure for defective work

 

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