Question

More Internet Research:

1. Research online to find a company that utilizes Just-in-Time manufacturing and write short two-paragraph report giving the details. (Make sure the company uses JIT for inventory control and management. Do not use a restaurant that makes a customer's food to order for your example. Thanks! )

a. In your first paragraph, give details about the company, its main products and its manufacturing. (Three sentences, minimum)

b. In the second paragraph, explain how the company incorporates JIT accounting. (Again, three sentences, minimum)

2. As always, spelling, grammar and punctuation count.

3. Cite all sources (provide a URL to company's website).

Answer 1

I am taking an example of automobile manufacturing company where rawmaterials are purchased from different vendors, processed and sold to different customers. It manufactures products only on the basis of made to order. Its main products are fenders, bumbers, mudguards, cowls, wheel weights and counter weights.

Accounting:

The company I am referring to has a customized ERP. It does the following:

1) as soon as the sale order is entered into the system, based on Bill of material uploaded by the research and engineering team, it calculates the rawmaterials required and message will go to purchases team to place order for the same considering the leadtime, order lot and economic order quantiry. Once purchase team places order, vendor will send the rawmaterials. As soon as the rawmaterials enter the gate gate entry is created and rawmaterials are sent to quality team (depends the vendor whether quality check required or not). Once quality team approves the quality, Goods receipt note is created for the quantity accepted by the company. These rawmaterials are sent to shop floor for usage. They are processed and sent to the customer. The important point in JIT is that payment to vendor is done mostly based on the amount of quantity that is required to produce the actual output subject to adjustment to shopfloor rejections due to company's mistake.

Please find below the entries starting from raising GRN to sale:

1. At the time of creation of GRN

Inventory interim a/c dr.

To Goods Received but Invoice not Accounted (GRIA)

2. At the time of aacounting the invoice

a) GRIA a/c dr.

To inventory interim a/c

b) inventory (raw materials) a/c dr.

To creditor a/c

3. At the time of completion of production order

Inventory (Finished goods) a/c dr.

Direct expenses a/c dr.

To inventory (raw materials) a/c

(till then issues will be controlled through manual indents as processing time is less the the company i am referring to)

4) at the time of sale

a) Cost of goods sold a/c dr.

To inventory (finished goods) a/c

This cost of goods sold is my debit to profit and loss account in the financials.

b) customer a/c dr.

To sales a/c

For the sake of simplicity GST, and TDS provisions are not folowed.