Materials returned to vendors may be recorded on the invoice price or in accordance with the method adopted for pricing out material issues. Recording of materials returned at invoice price is not realistic. This is because the price per unit that a vendor grants on the return of materials cannot be the same as the original invoice cost. Adjustments for discount, freight, carriage inward, etc., must be made to arrive at the same time. Returns should be valued using the same method adopted for pricing out material issues, and then entered in the Issued Column in the stores ledger. Sometimes, the materials that a department requisitions may not be used in full. In such cases, the surplus needs to be returned to the stores. If any shortage of materials is noted on making a physical verification of stock of materials, it should be entered in the Issued Column of the stores ledger and valued in accordance with the method adopted for pricing out material issues.Pricing of Surplus Materials Returned to Store
Treatment of Shortage of Materials
Pricing of Materials Returned to Vendors FAQs
The return of materials may have been brought forward or may have been delayed. So, the price per unit would not remain constant.
The first option is to record the return of surplus at the price at which they were originally issued and to re-issue them at the same price on the next requisition.
Returns should be valued using the same method adopted for pricing out material issues, and then entered in the issued column of the stores ledger.
The shortfall should be entered in issued column in the stores ledger and valued using the method adopted for pricing out material issues.
Shortages should be valued at the price of purchase in the received column in the stores ledger. The issued column can then be debited to close it.
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.
To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.
