DECLARATION BY THE STUDENT

Certified that the project work is actually carried out by

me and it is original in nature.

Signature of the Student

AHS Exam Roll No:
Regd. No. MA28C18065
 DECALRATION BY THE GUIDE

Certified that Miss R. Natasha of XII, Commerce, AHS

exams Regd. No. MA28C18065 Roll No : ………………….
has done her project work under my guidance. Her work is
original in nature and has not copied from anywhere.

Signature of the guide.

 ACKNOWLDGEMENT

The satisfaction that accompanies the successful completion

of task would be incomplete without mentioning that person
who made it possible. Whole encouragement and consistant
guidance crowned my effort with success.

I take opportunity to express my heartfelt in-debtness & deep

sense of gratitude to my guide Mr. Mayadhara Barik for his
inspiration, guidance & constant encouragement from
completion of my project work. I am also indebted to the
revered principal Mrs Mamata Patri of my college for his
contribution of creating a best academic culture of learning. I
am highly obliged to the author of elements of cost accounting
who are the real source of knowledge ay my foundation stage.
I thank all those who have directly or indirectly helped in my
project. Finally the entire project work is dedicated to my
parents.

Signature of the Student.

 CONTENTS

Sl. No. Particulars Page

1. Introduction 7

2. Objective of the study 8

3. Methodology 9-10

4. Presentation with illustration 11-13

5. Analysis & Interpretation 14-16

6. Conclusion 17-18

7. Reference 19
 INTRODUCTION

Materials constitute a very significant portion of total cost of

finished goods. In cost accounting proper recording &
controlling over the material cost is very essential. Material
control is a systematic control over the procurement, storage
and usage of material so as the maintain an even flow of
material. Therefore, maintenance o inventory (Stores) records
in an integral part o inventory control. Proper string of
materials is of primary importance. If is not enough only to
purchase material of the required quantity. If there purchased
material subsequently deteriorate in quality because of bad
storage, the loss is even more that what might arise from
purchase of bad quality materials. Apart from the preservation
of quality, the store keeper is also must ensure safe custody of
the material in the scores department. Therefore, proper
storing of material is necessary to reduce cost of production
and offers efficient service. Storing of materials is the process
of receiving, storing and issuing of materials according to
needs. Thus, the duties of a store keeper are: Receiving the
materials storing them. Keeping the record issuing them”.
For control over stores operation, the following two
documents or records are used-

- Bin card
- Stores ledger
In this project works, an attempts has been made to study
the process of preparing store ledgers.
 OBJECTIVE OF THE STUDY
The objective of the project work are :
1. To study the recording practices in B in card and store
ladger.
2. To study the various methods for valuation of materials
issued from the stores.
3. To prepare the store ledger under First-in First –out
(FIFO) methos & cast-in-first-out (CIFO)method.
 METHODOLOGY
In the study material of nstitute of charted accountants of
India, all the methods of pricing of materials have been
suitably classified in to our categories i.e. cost price method,
average price methods, notional price methods under cost
price methods, the following methods are given :-
 First-in-first out method
 Late-in-first out method
 Base stock method.
Dr. R.K. Bal, Dr. P.K. Swain and Dr. B. Bal (2016) have
explained the concept of FIFO method and LIFO method in
most simplified manner. According to there authors, FIFO
method id a method of pricing of the issues of materials in
order in which they purchased and they arrive in the store.
This method is considered suitable times of falling prices
because the material cost charged to production will be high.
Further, they explained that under LIFO method the prices of
the last batch(lot) are used for pricing the issues, Unitil is
exhausted. This method is suitable during inflationary period
or period of rising prices.
According to M.N. Arora(2015), FIFO method is based on
assumption that materials which are purchased first are to be
issued first. However , LIFO method operates in just the
reverse order of FIFO method. LIFO method is based on the
assumption that the last materials purchased are the first
materials issued.
According to Dr. A.K. Mohanty ad others (2017) under FIFO
method materials are used in order in which they are
received. In other words, materials received first are issued
first. LIFO method is exactly the opposite of FIFO method.
They have explained that under LIFO method materials
received last are issued first.
 PREPARATION WITH ILLUSTRATION:
The following stores information is extracted from the cost
accounts records of a small manufacturing company:-
Name of the material : Z (code No. AB-205)
Opening stock as on 01.10.2019-100 units at Rs.5/- per unit.

Purchases
05.10.2019 300 units at Rs 6/- per unit
08.10.2019 500 units at Rs 7/- per unit
12.10.2019 600 units at Rs 8/- per unit

Issues
06.10.2019 250 units
10.10.2019 400 units
14.10.2019 500 units

We have to prepare store ledger under LIFO, LIFO and

Average cost method separately.
 Store ledger Account
(Under FIFO method)
Date Particulars Receipts Issues Balance
Qty. Rate Amt. Qty. Rate Amt. Qty. Rate Amt.
2018 Opening - - - - - - 100 05 500
Oct 01 Balance
Oct.05 Received 300 6 1800 - - - 100 05 500
vide G.R. 300 06 1800
Note No,
Oct.06 Issued vide - - - 100 05 500 150 06 900
M.R. Note 150 06 900
No,
Oct. Received 500 7 3500 - - - 150 06 900
08 vide M.R. 500 07 3500
Note No,
Oct. Issued vide - - - 150 06 900 250 07 1750
09 M.R. Note 250 07 1750
No.
Oct. Received 600 08 4800 - - - 250 07 1750
12 Vide GR 600 08 4800
note No
Oct. Issued vide - - - 250 07 1750 350 80 2800
14 MR note No. 250 08 2000
TOTAL 1400 - 10100 1150 - 7800 350 08 2800

i. Total material consumed : No. of units 1150

Value – Rs. 7800
ii. Closing stock : No. of units 350
Value – Rs. 2800
 Name : Material Z

Date Particulars Receipts Issues Balance

Qty. Rate Amt. Qty. Rate Amt. Qty. Rate Amt.
2019.Oct.01 Opening - - - - - - 100 05 500
Balance
2019.Oct.05 Received 300 6 1800 - - - 100 05 500
vide GR 300 06 1800
note no.
2019.Oct.06 Issue vide - - - 250 06 1500 100 05 500
MR note 50 06 300
no.
2019.Oct.08 Received 500 7 3500 - - - 100 05 500
vide GR 50 06 300
note no 500 07 3500
2019.Oct.10 Issue vide - - - 400 07 2800 100 05 500
MR note no 50 06 300
100 07 700
2019.Oct.12 Received 600 08 4800 - - - 100 05 500
vide GR 50 06 300
note no 100 07 700
600 08 4800
2019.Oct.14 Issued - - - 500 08 4000 100 05 500
50 06 300
100 07 700
100 08 800
TOTAL 1400 - 10100 1150 - 8300 350 - 2300

i. Total Materials consumed : No. of units 1150

Value Rs. 8300
ii. Closing stock : No. of units 350
Value Rs.2300
 ANALYSIS & INTERORETATION
Value of materials issued to production. The value of material
issued to production under FIFO & LIFO methods comes to
7,800/- & 8,300/- respectively. The value of the closing stock
of materials under FIFO & LIFO methods comes to Rs 2800
and Rs 2300 respectively. The reasons for the difference of Rs
500 (Rs 8300-Rs 7800). As shown by the following table –
Date FIFO LIFO Difference
(L-F) (Rs.)
Qty. Value (Rs.) Qty. Value (Rs.) Qty.
2019 Oct. 06 250 1400 250 1500 100
Oct. 10 400 2650 400 2800 150
Oct. 14 600 3750 600 4800 250
Total 1150 7800 1150 8300 500
 FINDINGS:-
i. On 06.10.2019, 250 units were issued to production under
FIFO their value comes to Rs.1400 (100 unit x Rs.5 +150
units x 26) and under FIFO Rs.1500(250xRs.6). Hence
Rs.100 was more changed to production under LIFO.
ii. On 10.10.2019, 400 units were issued to production.
Under FIFO their value comes to Rs.2650 ( 150x Rs.6 +250
x Rs.7) and under LIFO (400x Rs.7) . Hence rs.150 was
more changed to production under LIFO.
iii. On 14.10.2019, 500units were issued to production.
Under FIFO their value comes to Rs.3750 (250xRs.7 +
250xRs8) and under LIFO Rs.4000 (400xRs.8). Hence
Rs.250 was more charged to production under LIFO.
Thus, the total excess amount charged under LIFO comes to
Rs.500. The price of the material issued is the case price of
material purchased. In this case, it is noticed that it is a case
of rising prices. This LIFO method is useful during the
period of rising prices because materials are issued from the
latest lot of purchased which are closely related to the
current price levels.
 VALUE OF CLOSING STOCK
Method of pricing issue Value of closing stock
FIFO Rs. 2800
LIFO Rs. 2300

The reasons for the difference of Rs. 500 ( Rs 2800 – Rs

2300) in the value of 350 units closing stock of material under
FIFO & LIFO method are follows:
i. In the case of LIFO, all the 350 units of closing stock belongs
to the purchase of material made with 12th October 2019
where as under LIFO method these units were from opening
balance of purchase made on 5th October, 8th October and 12th
October.
ii. Due to different purchase price paid by the company on
different days of purchase, the value of closing stock differed
under FIFO and LIFO. Under FIFO 350 units of closing stock
were value @ Rs.8 per unit. Where as, under LIFO first 100
units were valued @ Rs. 5 per units, next 50 units were valued
@ Rs.6 per unit, next 100 units @ Rs.7 per unit & last 100
units @ Rs.8 per unit.
 CONCLUSION:

FIFO method is suitable when prices are falling where as

LIFO method is suitable during the period of rising prices.
Under LIFO, the cost materials issued will be either nearer or
will reflect the current market price. Thus the cost of goods
produced will be related to the trend of by market price of
materials. Such a trend of market price of materials enables
the matching of cost of production with sales revenues. So,
use of LIFO method during the period of rising prices does
not reflect under high profit in the income statements, as it
was under FIFO method. Infact , under LIFo the profit shown
is relatively lower because the cost production takes in to
account the rising trend of material prices. But in case of
falling prices, profit under LIFO method tends to rise due to
lower material cost, yet the finished products appear to be
more competitive and are market price.

Since, LIFO method reduces the burden of income tax during

the period rising prices, So this system of material issue is not
accepted by income tax authority in India.
 REFERENCE:

1. Institute of chartered accountants of India (2019) “ Cost

accounting & financial management”, Module -1
2. Bal R. K. Swain, P. K and Bal B. bal (2017), “A New
Approach to cost accounting” S. Chand & Co. ltd, New
Delhi.
3. Arora, M.N. (2016) “ Cost Accounting – Principles and
practice “ Vikash Publishing House Pvt. Ltd. , New
Delhi.
4. Nayak, A. P. Mohanty , A.K. Baral, H. Lenka, D &
Satapathy , M (2018) “ cost accounting “ The Odisha
State Bureau of text book preparation & production,
Bhubaneswar.