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    Ankita Project On Costing

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    Biplab Swain
    The document is a project report submitted by Ankita Priyadarshini, a second year commerce student, on preparing a store ledger account under FIFO and LIFO methods. It contains an introduction outlining the importance of store keeping, different types of stores like centralized, decentralized and central stores with sub-stores. It discusses the need for storing materials and objectives of maintaining a store ledger. The methodology section explains preparing store ledger accounts using FIFO and LIFO methods to value material issues.

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    Ankita Project On Costing

    Uploaded by

    Biplab Swain
    289 views14 pages
    The document is a project report submitted by Ankita Priyadarshini, a second year commerce student, on preparing a store ledger account under FIFO and LIFO methods. It contains an introduction outlining the importance of store keeping, different types of stores like centralized, decentralized and central stores with sub-stores. It discusses the need for storing materials and objectives of maintaining a store ledger. The methodology section explains preparing store ledger accounts using FIFO and LIFO methods to value material issues.

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    costing

    Original Title

    ANKITA PROJECT ON COSTING

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    The document is a project report submitted by Ankita Priyadarshini, a second year commerce student, on preparing a store ledger account under FIFO and LIFO methods. It contains an introduction outlining the importance of store keeping, different types of stores like centralized, decentralized and central stores with sub-stores. It discusses the need for storing materials and objectives of maintaining a store ledger. The methodology section explains preparing store ledger accounts using FIFO and LIFO methods to value material issues.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    289 views14 pages

    Ankita Project On Costing

    Uploaded by

    Biplab Swain
    The document is a project report submitted by Ankita Priyadarshini, a second year commerce student, on preparing a store ledger account under FIFO and LIFO methods. It contains an introduction outlining the importance of store keeping, different types of stores like centralized, decentralized and central stores with sub-stores. It discusses the need for storing materials and objectives of maintaining a store ledger. The methodology section explains preparing store ledger accounts using FIFO and LIFO methods to value material issues.

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    You are on page 1of 14

    A PROJECT WORK

    ON
    PREPARATION OF STORE LEDGER ACCOUNT UNDER
    FIFO AND LIFO METHOD

    SUBMITTED TO CHSE , ODISHA FOR FULIFILMENT OF AHSE-2022

    SUBMITTED BY:

    Name : Ankita Priyadarshini


    CLASS: +2 2nd Year
    COLLEGE ROLL NO: IC20-0215
    REGD: NO.:MA19C20015 CHSE ROLL NO :

    GUIDED BY:
    MISS PRARTHANA MISHRA

    DEPARTMENT OF COMMERCE
    KAMALA NEHRU WOMEN`S COLLEGE, SESSION: 2020-22
    BHUBANESWAR

    Signatures of the Student

    Sign of the External Evaluator Sign of Internal Evaluator


    CERTIFICATE

    This is to certify that ANKITA PRIYADARSHINI is the student of +2 2 nd


    Year Commerce in Higher Secondary Examination of CHSE ,Odisha
    has satisfactorily carried and conducted her Dissertation entitled
    “PREPARATION OF STORE LEDGER ACCOUNT UNDER FIFO AND LIFO
    METHOD” .She has completed her Dissertation work under my
    guidance and supervision. The project work is the outcome of her
    work.

    We wish her a successful career.

    Authorized Signatory

    Place: Miss Prarthana Mishra


    Date: (Project Guide)
    DECLARATION

    I ANKITA PRIYADARSHINI , College Roll No. IC20-015, a student of the


    +2 2nd Year Commerce of Higher Secondary Examination of CHSE,
    Odisha do hereby declare that the present study was undertaken by
    me under the guidance of Miss Prarthana Mishra , KAMALA NEHRU
    WOMEN`S COLLEGE , Bhubaneswar and the project report entitled
    “PREPARATION OF STORE LEDGER ACCOUNT UNDER FIFO AND
    LIFO METHOD ” is of my own and has neither been submitted to this
    nor any other institution any where previously.

    Ankita Priyadarshini
    Roll No : IC20-015
    ACKNOWLEDGEMENT

    I would like to express my special thanks of my teacher Miss


    Prarthana Mishra, who gave me the golden opportunity to do this
    wonderful project of “preparation of store ledger account under fifo
    and lifo method” and also helped me in completing my project. I came
    to know about so many new things I am really thankful to her.
    Secondly, I would also like to thank my parents and friends who
    helped me a lot in finalizing the project within limited time frame.

    Ankita Priyadarshini
    +2 2nd Year Commerce
    CONTENTS

    Sl No. Title Page No.

    1. Introduction 01

    2. Types of Stores 02

    3. Objective 05

    4. Methodology 05

    5. Problem Statement 07

    6. Conclusion 09

    7. References 10
    INTRODUCTION:

    Store keeping is very important for all organisations for handling various
    items of stores today use. The organisation may be small, medium and
    large but it must have its separate stores department. The organisations
    which neglect stores departments have to suffer from various types of losses,
    damages, shortages, pilferage, deterioration, incorrect issue and wrong
    preparation of documents etc.

    To strengthen material control, purchase control must be matched by


    equally effective stores control to our losses from misappropriation, damage,
    deterioration, evaporation and carelessness. The investment in materials
    constitutes a major portion of current assets, so there should be a separate
    stores department to exercise store control. It is an amazing fact that in
    many industrial organisations while a most rigid control over cash exits,
    little or no attention is paid to materials. It is not desirable. Materials to
    become cash on the sale of the finished products represent an equivalent
    amount of cash. Therefore, it is desirable to have an efficient and well
    equipped stores department to exercise and effective material control.
    TYPES OF STORES:

    There are three types of source such as centralized stores, decentralized


    stores and central stores with sub stores.

    a. Central Stores:

    The usual practice in most of the firms is to have a central store. In case of
    such a store, materials are received by and issued from one stores
    department. All materials are kept at one Central Store.

    Advantages:

    1.Better control can be exercised over stores because all stores and housed
    in one department.

    2. Better layout of stores is possible.

    3. Less storage space are kept to a minimum.

    4. Investment in stocks is minimized.

    5. Economy in cost. Examples are reduced clerical costs and economy in


    records and stationery.

    6. Economy in staff and concentration of experts in one department will lead


    to development of higher technical skill.

    7. Less botheration in inventory checks as all the stores are located at one
    place.

    Disadvantages:

    1. This system of stores increases transportation cost because one Central


    Store may not near to every department of the factory.

    2. Delay and inconvenience caused to departments(situated at a distance


    from the central stores) in drawing materials from the central stores.
    3. Greater risk of loss in case of fire.

    4. Breakdown in transport may stop production in departments.

    (b) Decentralized stores:

    Under this type of stores, independent stores are situated in various


    departments. Handling of stores is undertaken by the store keeper in each
    department. The departments requiring stores can draw from their
    respective stores situated in their departments.

    Advantages:

    1. Materials can be drawn conveniently without any delay from the


    independent stores by the respective departments.

    2. No transport cost is incurred in bringing the materials to the production


    departments.

    3. Risk of loss is relative less as less quantity of material is used.

    4. The supply of stores to various departments can be assured as the


    requirements of only one department are catered to.

    Disadvantages:

    1. Investment in stocks is huge at same type of material is to be kept at a


    different places.

    2. Decentralized stores are uneconomical due to increase in overheads like


    salary to clerks, office expenses etc.

    3. An effective control cannot be exercised as it becomes difficult to check all


    stores.

    4. The expertise of specialized staff may not be obtained.


    (c) Central stores with sub stores:

    In large factories, departments are situated at a distance from the central


    Store. In such a situation to keep the transportation costs and handling
    charges to minimum, shop stores(in addition to the central stores near the
    receiving department) should be situated near production departments. For
    each item of materials, a quantity is determined and this should be captain
    stock in Sub Store at the beginning of any period.

    At the end of a period the store keeper of each sub Store will requisition
    from the central stores the quantity of the material consumed to bring the
    stock up to the predetermined quantity. In short, this type of stores operates
    in a similar way to petty cash system, so this system of Stores is also known
    as the imprest system of stores control.

    NEED FOR STORING:

    Good store keeping helps company to receive and distribute materials easily,
    quickly and more efficiently.

    Advantages:

    1.It reduces the inventory investment to the minimum by avoiding the ideal
    material in stores. It helps the company to have more profitable use of
    working capital.

    2. It ensures continuous flow of materials for different jobs and avoids


    stoppage in manufacturing operations. This helps the company to maintain
    production schedule and deliver the goods as per promised delivery dates. It
    helps the company to know the stock position. It helps the company to take
    timely action by replenishment of stock as soon as the stock reaches at
    reorder level.

    3. It helps the material to be protected against damages, deterioration, theft,


    pilferage and unauthorised removal etc.
    4. It supplies the production department raw materials of good quality and
    helps the company to produce goods at lesser cost.

    5. It is a link between purchasing and production. It helps the farm to have


    material of high quality, or right quantity and at right place and at right
    time not for the present but also to anticipate the future needs of materials
    for an organisation. It helps in minimising the cases of accidents by proper
    placing the stores indifferent racks, bins and selves.It provides up to date
    information on material requirements. It makes regular analysis to control
    losses, wastages, obsolescence and pilferage. This is necessary to avoid
    mismanagement of stores.

    OBJECTIVE:

    1. To record both quantity and values of stocks kept in a store.


    2. To keep an account of every item of a store and makes a record of the
    receipts, issues and balances.
    3. To find out the information about the pricing of materials issued and the
    money value at any time of each item of stores.

    METHODOLOGY:

    Here in this project we are applying LIFO & FIFO method to prepare store
    ledger account.

    This ledger keeps an account for every item of stores and makes a record of
    the receipts, issues and balance both in quantity and value. It is maintained
    by the costing department. There are two methods.

    1. FIFO ( First in First out) method.


    Under this method material is first issued from the earliest
    consignment on hand in the store and priced to the job or order at the
    cost at which that consignment was received in the stores.
    2. LIFO ( Last in First out) method.
    It is the method of pricing material issues. At the time of issue of
    material , material is issued at the price of latest available lot in the
    store.

    PROBLEM STATEMENT:

    You are presented with the following information by Om Engineering


    Company related to the first week of December ,2021.
    Days Receipts Issues
    Units Rate per unit (Units)
    1st 40 15.00
    2nd 20 16.50
    3rd - - 30
    4th 50 17.10 -
    5th - - 20
    6th - - 40

    Calculate the cost of materials issued under FIFO & LIFO method.

    SOLUTION:

    1. Cost of materials issued and the value of closing stock under FIFO
    Method.

    December 3, 2021: Issued 30 units@ Rs. 15 per unit


    December 5, 2021: Issued 10 units@ Rs. 15 per unit = Rs. 150.00
    Issued 10 units@ 16.50 per unit = Rs. 165.00

    December 6, 2021 Issued 10 unit @ Rs. 16.50 = Rs. 165.00


    Issued 30 units @ Rs.17.10 = Rs. 513.00

    Closing stock : 20 units@ Rs.17.10


    2. Cost of materials issued and the value of closing stock under LIFO
    Method.

    December 3, 2021: Issued 20 units@ Rs.16.50 per unit = Rs. 330.00


    Issued 10 units@ Rs. 15 per unit = Rs. 150.00

    December 5, 2021 Issued 20 unit @ Rs. 17.10 = Rs. 342.00


    December 6, 2021 Issued 30 units @ Rs. 17.10 = Rs. 513.00
    Issued 10 units @ Rs. 15.00 = Rs. 150.00

    Closing stock : 20 units@ Rs. 15.00


    Conclusion:

    From the above study herewith we conclude that both FIFO & LIFO
    methods are vital because one used to increase the price and the other one
    is being used to reduce the price.
    That is LIFO method recovers the cost of purchase from production because
    material is issued at its actual cost of purchase . Material is issued at the
    recent price because it is issued from the latest lot in the stores.

    Under the conditions of rising prices LIFO method is recommended because


    materials are issued at the current market prices which are high. This will
    increase cost of production which in turn will reduce profit. Lower profit will
    reduce burden of income tax.

    Where as FIFO method pricing material issues because materials will be


    issued from the earliest lots which are purchased at higher rates. In this
    way cost of production will increase because materials are issued at higher
    rates. Increased cost of production will reduce profit giving less income tax
    burden.

    The consistency principle requires a company to adopt an accounting


    method and follow it consistently from one accounting period to another.
    That is incase of rising prices LIFO method is recommended and in case of
    falling prices FIFO method is recommended.
    REFERENCES

     S.P.JAIN, M.Com, ACMA, Ex- Associate Professor in Commerce, Department of

    Commerce, Shaheed Bhagat Singh College(University of Delhi, Sheikh Sarai,

    Phase II , New Delhi,

     SIMMI AGARWAL, Ph.D, FCA, ACMA, Director , Institute of Financial Education

    & Learning , Ghaziabad,(U.P),

     K.L.NARANG,Department of Commerce, Government College, Chandigarh and

    Principal, Govt. College, Kapurthala ( Punjab ),

     MONIKA SEHGAL, Associate Professor, Govt. College for Girls Sector 42,

    Chandigarh(Punjab)

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