PROPER ACCOUNTS HEAD

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J.SINGH (Querist)
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15 May 2024 Sir
I am employed as an accountant in a firm where paint is applied on finish goods for identification of material so I would like to know under which head it should be posted currently I am posting it under consumable store

thanking you

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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10 July 2024 Paint used for the purpose of identifying materials or finish goods typically falls under the category of "Consumables" or "Consumable Stores" in accounting terms. Here’s why and how you can handle it:

### Posting Under Consumable Store:

1. **Nature of Expense**:
- Paint used for identification purposes is considered a consumable item because it is not part of the finished product but rather a material used in the production process.
- It is not incorporated into the product itself but rather applied externally or temporarily for identification or marking purposes.

2. **Accounting Treatment**:
- **Consumable Stores Account**: This account is used to track expenses related to materials that are consumed during the manufacturing or production process.
- When you purchase paint for identification purposes, you would debit the "Consumable Stores" account to record the increase in inventory or stock of consumables.
- When the paint is used, you would credit the "Consumable Stores" account to reflect the decrease in inventory due to consumption.

3. **Example Journal Entries**:
- **Purchase of Paint**:
- Debit: Consumable Stores Account
- Credit: Accounts Payable/Cash/Bank (depending on payment method)

- **Usage of Paint**:
- Debit: Production Expense Account (if it's directly related to production)
- Credit: Consumable Stores Account

### Considerations:

- Ensure that you have a clear policy or procedure for recording and tracking consumables like paint. This helps in maintaining accurate records of materials used in production or identification processes.
- Review periodically to ensure that the usage of consumables aligns with production needs and that inventories are properly managed.

By posting paint used for identification under "Consumable Stores," you correctly account for it as a material expense related to the production process without directly impacting the cost of goods sold or finished products. This approach ensures that your financial records accurately reflect the consumption of materials and support cost control measures within the firm.