MONOPOLY POWER AND GOVERNMENT REGULATION.

A company’s inventory records should show (1) the quantity of each kind of material on hand and (2) its cost. The most desirable method of achieving this result is to integrate the materials accounting system with the general ledger accounts. All purchases of materials on account are recorded as a debit to Materials in the general ledger.

The materials account is a control account that is supported by a subsidiary materials ledger containing an individual account for each type of material carried in stock. Periodically, the balance of the control account and the total of the subsidiary ledger accounts are compared, and any significant variation between the two is investigated.  Each of the individual materials accounts in the materials ledger shows (1) the quantity on hand and (2) the cost of the materials. To keep this information current, it is necessary to record in each individual account, on a timely basis, the quantity and the cost of materials received, issued, and on hand. Copies of the purchase order and receiving report are approved by the purchasing agent and sent to the accounting department.