Electronic Data Processing System (EDP System) for Materials Received and Issued:

The preceding description of invoice approval and payment was for a manual operation performed by an accounts payable clerk or an invoice clerk.

In an electronic data processing system (EDP system), the computer–to a great extent–replaces the clerk. Upon receipt of the invoice (the source document), the accounts payable clerk enters the account distribution on the invoice. The data are then directly inputted from the invoice to the computer data bank via a terminal device. The data are edited, audited, and merged with the purchase order and the receiving order data, both of which have been stored in the computer data bank. The common matching criterion on all documents in the purchase order number. Quantities, monetary values, due dates, terms, and unit prices are matched. When in agreement, the cost data are entered in the accounts payable computer file with a date for later payment.

The above procedure deals with the accounts payable phase of a purchase transaction. Of equal importance is the need for posting the data in quantities and dollar values to the materials inventory file in the electronic data processing system (EDP system). The information enters the EDP system from either the invoice or the invoice approval form, which would have to include all computer-necessary data. The internal computer program updates the materials inventory file. The withdrawal of materials could also be programmed, so that manual posting to the materials inventory file would be eliminated.

You may also be interested in other useful articles from “controlling and costing materials” chapter:

1. Purchases of productive material
2. Purchases of supplies, services, and repairs
3. Materials purchasing forms
4. Receiving materials
5. Invoice approval and data processing
6. Correcting invoices
7. Electronic data processing (EDP)  for materials received and issued
8. Cost of acquiring materials
9. Storage and use of materials
10. Issuing and costing materials into production
11. Materials ledger card – perpetual inventory
12. First-in-First-Out (FIFO) Costing Method
13. Average Costing Method
14. Last-in-First-Out (LIFO) Costing Method
15. Other Methods-Month end average cost, last purchase price or market price at date of issue, and standard cost
16. Inventory valuation at cost or market whichever is lower
17. American Institute of Certified Public Accountant (AICPA) cost or market rules
18. Adjustments for departures from the costing method used
19. Inventory pricing and interim financial reporting
20. Transfer of materials cost to finished production
21. Physical inventory
22. Adjusting Materials Ledger Cards and Accounts to Conform to Inventory Accounts
23. Scrap and waste
24. Spoiled goods
25. Defective work
26. Discussion Questions and Answers about Controlling and Costing Materials