In this article we will discuss about:- 1. Introduction to Material Control 2. Need or/Objectives of Material Control 3. Essentials 4. Advantages 5. Materials Management and Organisation.

Introduction to Material Control:

A major objective of Cost accounting is Cost Control. Every element of cost has to be effectively controlled. Out of the three elements of cost i.e., Material, Labour and Expenses, Materials form a major chunk of cost of production. An analysis of financial statements of a large number of private and public sector organisations reveals that about 55% of cost of production consists of material cost, on an average. It is essential, therefore, for every organisation to devise a suitable system of material control from the time of placement of purchase requisition to the time of final consumption of the material.

Material Control is a system which ensures required quantity of material of the required quality at the right time and place with minimum investment of capital. It may be defined as- “The regulation of the functions of an organisation relating to the procurement, storage and usage of materials in such a way as to maintain an even flow of production without excessive investment in material stock”.

An efficient material control system can improve the input output ratio. It is an effective integration of various aspects and includes scheduling the requirements, purchasing, receiving and inspection, maintaining stock records and stock control. Material control is accomplished through periodical reports and records relating to purchasing, receiving, inspection and issue of materials. It is also effected by establishment of functional organisation and fixation of responsibilities through standard forms of accounting records and reports.

Need or Objectives of Material Control:


As a major portion of cost of production consists of material cost, the cost accounting system can be effective only when there is an efficient material control. The following are the objectives of material control.

1. Ensuring Supply of Adequate Quantity of Materials:

Sufficient quantity of material should be made available for all the activities and departments in the organisation so that uninterrupted production can be carried on and work does not stop due to non-availability of materials.

2. Optimum Investment in Materials:


Keeping the amount invested in materials under control is a central objective of material control. Locking up of funds in stocks results in mismanagement of working capital. Overstocking should be avoided in view of its disadvantages. Excessive investment and over stocking can be avoided by fixing maximum stock level for all major items of materials.

3. Favourable Terms of Purchase:

The purchase price and other terms of purchase should be of maximum advantage to the firm. At the same time, quality and specifications of the materials should be as per requirements.

4. Control of Wastage:


Wastage of material during storage and handling on the production floor should be minimised. Standards can be fixed for wastage and efforts can be made to keep the actual wastage below the standard level. Pilferage, theft, etc., should be minimised to keep material cost within control.

5. Control of Obsolescence and Spoilage:

Loss due to materials becoming out of date or getting spoiled and unusable is a major cause for material losses. Fixing stock levels and utilising materials in time can minimise such losses.

6. Proper Reporting to Management:


Management has to be informed frequently about stock of raw materials so that production is planned. This is possible only if there is proper reporting system and updating of records by the store keeper.

7. Prevention of Misappropriation of Materials:

Proper internal check of receipts, issues and consumption of raw materials helps in prevention of misappropriation of materials by the employees.

8. Proper Control System for Settlement of Invoices:


Suppliers’ invoice is to be paid only after verifying the physical receipt of materials to avoid excess payment to the suppliers.

Essentials of Material Control:

The process of material control is divided into four stages – Purchase control, Stores control, Issue control and Control of material losses.

A brief outline of various aspects of material control is discussed below:

1. Co-Ordination:


Effective control of material requires effective co-ordination among the departments involved in purchasing – receiving, and inspection, storage, production, sales and accounting departments so that adequate materials are available for continuous production and sales. At the same time excessive investment in materials and over stocking are avoided.

2. Centralised Purchasing:

In order to economise the buying and to avoid reckless buying of raw materials the purchasing function is to be centralised.

3. Proper scheduling of materials requirements ensures availability of materials at the right time.


4. Classification and codification of material leads to easy identification and proper control of materials.

5. Receipt of Materials:

Checking and inspection of material by receiving department ensure correct quantity and quality of material as ordered by the organisation.

6. Usage of Forms:

Standard forms are to be designed and used for purchase requisition, purchase order, receiving of materials, requisition of materials and transfer of material from jobs to stores or to other jobs.

7. Storage of materials should be entrusted to a qualified store keeper to plan effective storage and avoid losses due to obsolescence, pilferage and theft.


8. Issue of Materials:

A good method of issue of materials to various jobs, processes and orders should be devised to ensure delivery of right material at the right time and right quantity and quality for smooth flow of production.

9. Stock Taking:

Perpetual inventory should be followed for stock verification to reveal differences in stock due to pilferage theft and wastage. Moreover perpetual inventory system avoids closing down of factory for stock verification and valuation.

10. Levels of stocks are to be maintained in the form of reorder level, maximum level and minimum level to avoid shortage and over stocking of materials.

11. Economic ordering quantity is to be operated for each type of materials to optimise the cost of buying and storage.

12. Pricing of Issues:

A suitable method of pricing is to be followed for correct, valuation of material cost of jobs, orders, processes and valuation of closing stocks.

13. Control of Materials during the Production Process:

Proper Accounting and records are to be maintained to avoid wastage of materials during consumption.

14. Suitable reporting system helps management to take decisions regarding investment in materials and avoidance of obsolete, dormant and slow moving materials.

Advantages of Material Control:

An Effective Material Control system:

1. Ensures availability of material for production.

2. Reduces wastage of raw materials.

3. Achieves economy of buying and storage cost.

4. Reduces pilferage, theft, obsolescence and other material losses.

5. Avoids excessive investment in stocks.

6. Helps in maintaining perpetual inventory system to furnish information to management regarding materials.

7. Helps in ascertaining valve of jobs, processes and orders.

Materials Management and Organisation:

Material management aims at minimising the cost through coordination of planning, purchasing, receiving, storing and control of materials in an effective manner. In these days of mechanisation and specialisation, logistics of purchasing and integrated management are practised. This has resulted in professional development of managers which will make them proficient in satisfying the requirements of an integrated materials management to bring together complex, conflicting and related functions of materials management.

The policies of government to tackle inflation through credit squeeze require professional management of materials. In order to perform inter-related functions through integration, the materials manager should be efficient enough to coordinate and control with an overall view to balance the conflicting objectives of various individual functions and aspects of materials.

The main merits of integrated materials management are performance, growth, accountability and adaptability to electronic data processing.

Organisation of Material Control:

Material Control is effected through cooperation and co-ordination of various departments involved such as purchasing department, receiving and inspection department, stores, production and stock control departments.

The role and function of each of these departments are discussed below:

(a) Purchasing Department:

Purchasing department is to make the purchase of required quantity of various items of materials at the right time of good quality at the most economical price.

The following are the functions of purchasing department:

1. Receiving of purchase requisitions from various departments.

2. Inviting quotations from different suppliers to deliver materials as per the specifications of purchase requisitions.

3. Preparing a comparative statement of quotations of suppliers.

4. Selecting a supplier from the comparative statement of quotations, one who offers most favourable terms with due regard to quality.

5. Drafting of purchase order and sending it to the supplier.

6. Following-up of purchase order to receive the materials at the specified time.

7. Checking various documents and certifying that materials of requisite quantity and quality are received; and

8. Passing purchase invoice for payment if everything is in order.

(b) Receiving and Inspection Department:

This department plays a vital role in examining the quality of raw materials and ensuring that sufficient quantity of materials as per purchase order are received.

The functions of this department are as follows:

1. Receiving materials from various, suppliers through various modes of transport and acknowledging the receipts.

2. Preparing Goods received note by filling up the details of quantity, grade and other information about materials by count, weight, etc.

3. Inspection of materials to check the quality and other specifications of materials.

4. Sending the materials received to stores and other places.

5. Communicating to the purchasing department and accounts department about materials received and inform them of any damage, shortages, etc.

(c) Store Keeping Department:

The main functions of this department are as given below:

1. Initiate purchase requisitions for materials, based on the position of stock.

2. Maintain various levels of stock.

3. Receipt of materials from receiving and inspection department.

4. Check the materials received by comparing with purchase requisition and place them in the proper bins.

5. Issue of materials on receipt of materials requisitions from various departments.

6. Maintenance of stores records like bin cards, by entering the receipt, issue and balance of materials.

7. Send periodical reports to the management regarding slow moving, dormant and obsolete materials to enable them to take suitable decisions and avoid losses.

(d) Production Department:

This department plays very crucial role in optimum utilisation of raw materials and reducing material losses by performing the following functions:

1. Initiate requisition for raw materials of required quantity and quality at the right time to carry on with smooth flow of production.

2. Verification of raw material received from stores.

3. Maintain proper records of materials charged to various jobs, processes and operations.

4. Prepare proper notes for return of material, transfer of material from one job or department to another.

5. Prepare proper records regarding work-in-progress, scrap, wastage, spoilage and defectives and send periodical reports to management to minimise these losses.

(e) Stock Control Department:

This department can be attached to cost accounting department or this function may be performed by the store keeping department itself.

The main functions of this department are:

1. Maintenance of perpetual stock records.

2. Make suitable adjustments of stock, based on the receipt of authorised notes and

3. Ascertain the average consumption of raw materials in terms of Quantity and value.