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UNIT 3 -Production & Inventory Cycle - Coggle Diagram
UNIT 3 -Production & Inventory Cycle
Internal Controls:
-
For safeguarding:
Inventory should be kept in a locked storeroom
Inventory susceptible to damage are safeguarded against the elements
Inventory sufficiently damaged
For issues of raw materials to production:
Issue notes are made out for issuing raw materials to production
-No changes are allowed on the issuing notes
I.R.O sales to clients, no inventory may leave the storeroom without a delivery note
For recording:
Continuous inventory records are maintained.
Regular inventory counts and comparison with inventory records.
Obsolete/slow moving inventory identified timeously and systematically written off according to company policy.
Weaknesses and risks
A practical example of a
weakness
would be a company without a daily production report ,which is a document that enables management monitor the status of the day to day operations in terms of its unusual changes related to raw material,labour and overheads.The
risk
here is that if proper queries and rectifications are not done,then this may lead to over spending due to lack of control affecting the business financially.
3 Functions:
Production Processing
Documents Used:
Pre-numbered Raw materials issues slip
-CJC OR IJC
Production Planning & Design
Documents Used:
Customer production order
Inventory production order
Customer job card
Inventory Job card
Daily production report
Inventory Management
Documents used:
-Relevant Ledger accounts
-Raw materials issues slip
Customer job card or inventory job card
Goods transferred note
Goods received note
Count sheets
4 Main Controls:
Production entries must be supported by relevant entries.
Storage and dispatch of manufactured inventory.
Maintenance of inventory master files
Physical and monitoring controls
Control Objectives:
Safeguarding
Issue of raw materials to production
Recording
Substantive procedures
Substantive analytical procedures
Detail substantive procedures