Study Notes management accounting acca f2

 
Issue of materials; 
➢
 
Recording receipts and issues. 
The Purchase of Raw Materials
Materials are purchased by companies for production and sales purpose. Purchase of material may be 
controlled by 
➢
 
Purchasing only necessary items 
➢
 
Orders to supplier after considering price & delivery issues; 
➢
 
Goods received agreed with goods ordered in quantity and quality; 
➢
 
Price paid is the price agreed when order was placed. 
 

---

F2 Management Accounting
Page 10 of 147 
Purchase Cycle: 
P 
Issue Material
 
 
(Material Requisition) 
 
Available 
If routine purchase 
Not Available
(Purchase Requisition)
(Quotations) 
If first purchase 
(Letter of enquiry) 
 
(Advice Note) 
 
Sending goods
to stores
(Purchase Order)
 
(Delivery Note) 
 
(Invoice)
(Credit note)
 
(Goods Received Note)
 
 

 
 
(Debit note) 
Invoice inaccurate
 
Invoice accurate 
Pay the supplier
Production 
Department
 
Stores 
Department.
 
Order to regular supplier 
Purchase 
Department.
 
Multiple 
Suppliers in 
the market.
 
Good Receipt Department.
 
Selected Supplier 
(Original) 
Two copies: 
1 for supplier. 
1 for goods receipts Dept. 
Copies: 
1 for Goods Receipt Dept 
1 for Purchase Dept 
1 for Accounts Dept 
1 for Stores Dept 
(with goods) 
Accounts Department
 
Copies: 
1 Purchase Dept 
1 Stores Dept 
1 Goods Receipt Dept 
1 Accounts Dept 

---

F2 Management Accounting
Page 11 of 147 
DOCUMENTS
 
FOR
 
BUYING
 
MATERIALS
The documents involved in buying and selling are prime source of cost and revenue information. The 
following documents used in purchase of materials. 
1. Purchase requisition 
➢
 
Prepared and send by the storekeeper to purchase department for buying the goods when inventory 
level falls down to the Reorder level. 
➢
 
Authorized by the supervisor of the stores or the departmental head who is responsible for 
department’s budget. 
2. Letter of Enquiry
➢
 
To determine the ‘appropriate’ supplier, the purchase department sends out a letter of enquiry (in 
case of new supplier) to various suppliers to find out about the price, delivery time, delivery charges, 
discounts, terms of payment etc. 
➢
 
The suppliers will respond to the letter of enquiry with 
● 
A catalogue and price list
(for standard goods),
● 
A quotation
(for non-standard goods) or
● 
An Estimate of cost
(for services such as building work and repair); 
3. Purchase Order
➢
 
A purchase order is prepared by purchase department and send to the selected or existing supplier. 
➢