Stores ledger definition
/What is a Stores Ledger?
A stores ledger is a manual or computer record of the raw materials and production supplies stored in a production facility. It is maintained by the person responsible for these assets, such as the warehouse manager. The information listed on a stores ledger can follow one of two formats:
Unit quantities only. The ledger shows the beginning unit quantity of an inventory or supplies item, plus or minus any subsequent additions to or subtractions from stock. When used for this purpose, the stores ledger may instead be referred to as a bin card.
Costed quantities. The same as the first format, except that the cost of the items is also listed in the ledger.
The stores ledger may sometimes also contain a "min max" field, in which is recorded the minimum quantity level, below which an order must be placed for additional units. When the on-hand balance drops below the designated minimum level, the purchasing staff is notified to order more goods.
What is Not Included in a Stores Ledger?
A business might elect not to record in the stores ledger any low-value, high-volume items, such as fasteners. It is much more efficient to simply store these items in large bins on the shop floor and use visual inspections to decide when to repurchase them. Tracking the use of individual units of these items in the stores ledger would be extremely time-consuming, and would provide little benefit.
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When to Use a Stores Ledger
The stores ledger concept is most applicable to record keeping systems that are entirely manual. The term is rarely used when a business has converted to computerized record keeping systems. A stores ledger is particularly useful for maintaining a perpetual inventory system, since it tracks the current quantity of items on hand. A stores ledger can be used for the following purposes:
By auditors, to see how well the company's inventory records compare to its on-hand quantities.
By the purchasing staff, to determine when and in what quantities to purchase additional inventory items.
By the accounting staff, to use as the basis for calculating the ending cost of inventory on hand.
Benefits of Using a Stores Ledger
There are multiple benefits associated with using a stores ledger, which include the following:
Accurate inventory tracking. A stores ledger helps maintain accurate records of inventory quantities and values. It allows organizations to know exactly how much stock is available at any given time. This minimizes the risk of stockouts, overstocking, and inventory losses.
Effective cost control. By recording all receipts, issues, and balances of materials, a stores ledger provides detailed information on inventory costs. This helps managers monitor material usage and identify any wastage or theft. With this information, organizations can implement better cost-control measures to reduce unnecessary expenses.
Supports audits. The stores ledger serves as an essential internal control tool by providing a verifiable record of all inventory movements. Auditors and internal reviewers can easily trace and verify transactions to ensure compliance with company policies. This strengthens accountability and reduces the risk of fraud or errors in inventory management.
Assists in valuation of ending inventory. The stores ledger provides accurate data needed for valuing inventory at the end of an accounting period. This helps in calculating the correct cost of goods sold and determining the value of closing stock. Accurate inventory valuation ensures that financial statements present a true and fair view of the company's financial position.
Terms Similar to Stores Ledger
A stores ledger is also known as a stock ledger.