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Unit 9: Warehousing

The goods received note is a temporary document to ensure that the financial stock and physical Notes
products in stock are accurate from the moment when the products are received until the moment
the purchase invoice is issued. It will:
 Debit the stock asset account with the quantity and cost of the products net of VAT

 Credit pending goods received notes account for the net amount on the goods received note
Even though the goods received note contains VAT amounts, no VAT postings are made. It is not
permitted to deduct VAT until a proper VAT invoice is received from the supplier.

Did u know? The function of the pending goods received notes account is to capture the
liability incurred by the receipt of the products.

9.2.2 Supplier Payment

When the materials are accepted by the quality control department, one copy of the GRN is sent
to stores for recording in the bin card, while the first copy is sent to accounts department as a
record of acceptance of materials ordered and supplied by the vendor. Once this has happened
and you have an invoice, it is time to complete a GRN. The GRN copy is matched with the
invoice, for payment. After it is checked and priced out by accounts department with reference
to purchase order, it is cleared for issue of pay order.
When materials are rejected by the quality control department, the purchase department informs
the supplier for replacement free of cost. The storekeeper shall keep the rejected material
separately for return to supplier. If payment has already been made, the accounts department
shall raise a debit note on the supplier, when rejected store is not replenished.

9.2.3 Recordkeeping

For planning and controlling operations, accurate information regarding materials must be
available to all the related departments. Information regarding description of all the materials,
quantity received and their locations is entered into the organization’s information system in
receiving. This is done by entering the data in a bin card. Each bin or location in the store has a
bin card which provides all the information on the material.
A bin card is shown in Figure 9.5. It is a quantitative record of receipt, issue and closing balance
of each item of stores. Separate bin cards are maintained for each item. Each card is filled up with
physical movement of goods i.e. on receipt and issue. Whenever you take out or put in your
goods, it records the movement. This makes it easy to work out the consumption for each article.
Without a bin card, you would have to go back to your issue orders to determine the status of
each item, which could be quite laborious. Therefore, bin cards are an essential measure of
internal control, as well as a very helpful tool for position/consumption reports.
Normally, an account will be maintained for each item carried in stores, which will be debited
for the quantity and value of stores purchased and credited for the quantity and value of stores
issued. This account is called the stores ledger shown in Figure 9.6. Stores Ledger is a quantitative
and value record of receipt, issue and closing balance of each item of stores. It is filled with the
help of goods received note and material issue requisitions.

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