The function of a stores ledger is, however, some what broader than simply to serve as a means of keep ing track of material. If properly kept it enables the manufacturer to carry the minimum amount of ma terial and hence keep down his investment to the lowest economical point. A well-kept stores ledger greatly facilitates the care of the material and is a great check on wastes and losses due to carelessness, either in workmanship or in the handling of materials. Where the material handled is varied and valuable there is the same need for a stores ledger as there is for a cash book, tho, curiously enough, it is difficult to convince many hard-headed managers that this is a fact.
3. Visual or "physical" inventories.—It is still cus tomary for many managers to take an inventory only once a year. Modern accounting methods demand, however, that an accurate record be kept of all changes in the value of the plant and the material. It is quite easy to keep a fairly accurate record of all changes in the plant and the equipment, but without good stores-ledger accounts not even an approxi mation can be made as to changes in inventories. With a good stores ledger, and a cost ledger which records the changes of material in process, a system which will be discussed later, a complete continuous inventory can be maintained, and the items in Figure 3 (page 27), which depend on material values, can be found at any time. It is a good policy, of course, to make an actual visual or "physical" inventory of the entire plant, occasionally, to verify these running in ventories. A good storekeeper will constantly check up material on hand to see that no wastes are oc curring from theft, carelessness or error, and to make sure that his stores ledger is a true inventory of the goods for which he is responsible. Where good storeroom methods are maintained in connection with a stores ledger, the checking up of the material on hand may be made a continuous performance, and where this is done systematically the stores ledger can be made a very accurate record. This constant check ing of bins and racks is useful, also, in that it brings to light periodically all dead stores, which are so com mon in most storerooms, and which not only repre sent idle capital but occupy valuable space in the storeroom or factory. A complete yearly visual in ventory becomes, in such a case, simply a check on the accuracy of the stores ledger.
4. Storing indirect and special material.—Indirect materials or supplies are treated, so far as stores are concerned, in the same way as direct material. If the plant is large they may be kept in a separate store room, but this system is rather exceptional. The method of withdrawing such material for use and of charging up its cost is, of course, very different from the procedure in the case of direct material; it is more fully discussed in Section 8, Chapter VII.
Special material is ordered for some particular piece of work and is not ordinarily used in the manu facture of other products. It should, therefore, be ordered with care, only enough being obtained to satisfy the particular need, as it may depreciate in value very rapidly in the storeroom. Sometimes special material is not put into the storeroom, but is sent directly to the place in the factory where it is needed, its value being charged to the proper account in the general books, or sent to the cost ledger, accord ing to the system in use. If, however, the time of the arrival of special material does not coincide closely with the time at which it is needed, it should be stored in regular manner. It is bad policy to have material which is not wanted lying around the factory.
5. Storing finished parts.—In continuous-process industries of the extreme type, where the raw ma terial is largely of the direct kind and flows thru the factory without pause, the functions of the storeroom may be confined largely to the care of supplies. as the industry approaches more and more closely the strictly intermittent type, it becomes increasingly nec essary to arrest the production of many parts at vari ous stages of completion and store them in a partly finished state until they are needed. Thus, in making a line of engines it may be sufficient, for the needs of the business, to make the flywheels singly as needed; but it may be economy to cast and partly machine the engine beds in small lots ; and, again, it may be desir able, both because of economy in manufacture, and also because of the possibility of quicker delivery of finished engines, to make up the small parts of the valve gear in fairly large lots. The financial and manufacturing economy underlying this practice is interesting and instructive, but it cannot be treated here; we must assume that the practice is correct.
If the business is a very large one, as previously stated, a separate storeroom, known as a finished parts storeroom, may be maintained, but usually the one storeroom cares for both raw material and finished parts. Sometimes a distinction is made between finished parts that are made in the shop, and pur chased finished parts. This distinction, however, is of no importance, provided the cost of each part is ac curately known.
Whether or not a separate storeroom is provided for finished parts, a careful and systematic record should be made of them, preferably on the continuous inventory plan. Figure 9 (page 85) shows a typical finished-parts-ledger sheet similar to the stores-ledger sheet shown in Figure 8. The cost of the finished parts may or may not be entered on this sheet, since this cost will always be available on the cost-ledger sheets, which will be described hereafter. In some cases, however, it is convenient, in issuing these parts, to have the cost so noted.