Stores Suspense Accounts
By Rajeev Bagalwadi, Sr.SO(A)/SCR/SC
Indian Railways being a large transport organization, it requires to procure or manufacture and stock items needed for its regular maintenance and upkeep of various services. The stores procured are Capital intensive and are stocked in depots located at different places on the Railway. As the receipt of material at depots is initially for stocking and then for issues to the consuming departments, they can not be charged off to final heads immediately. Hence, suspense accounts are to be maintained in Stores for temporarily keeping them in the suspense account and watch their clearance.
Various suspense accounts maintained in stores are as under:
1. Stores in Stock:This suspense account is maintained depot wise and it accounts for the materials received, inspected and accounted for in the depot. On receipt and accountal of the material, a receipt note is prepared which is the basis for posting the debit side of this account. Therefore, the transaction would be as under;
Stores-in Stock A/C Dr
To Purchase suspense A/C Cr
On issue of material by the depot to the consuming department, an issue note is prepared and this account is credited. The transaction would be
Revenue Demand/Work concerned Dr
Stores-in Stock A/C Cr
2. Purchase Suspense Account:When the material is supplied to the depot by the supplier, he receives a receipt note copy which is essential for him to claim payment. While the depot accounts for the material, payment is made by Accounts office. Therefore transactions where material is received but payment is yet to be made are passed through Purchase suspense. The receipt note copy of Accounts when received in the Purchase section, the Purchase Suspense is credited. When the bill of the supplier is received for payment and passed this account is debited as the corresponding credit is already available when Stores in Stock is operated. The transaction thus would be;
Purchase Suspense A/C Dr
To Cheques& Bills A/C Cr
While the above reflects the payment made after receipt of material, there are cases of advance payment to Suppliers in which case the Suspense account is first debited with corresponding credit to Cheques& Bills. On receipt and accountal of material, Receipt note forms the basis for affording credit against the debit for advance payment made. While a healthy balance in Purchase suspense would be credit, at times there can be debit balance in this account representing payments made to supplier but material not received in depot and accounted for.
3. Stores-in-Transit: Whille the stores are normally stocked in depots for issue to consuming departments, at times there will be transfer of store from one depot to another either within zonal railway or between zonal railways. When such transactions take place, the stores in stock eeA/c of both the issuing and receiving depot are to be credited and debited. e.g., ABC depot transfers material to PQR depot and the transactions are recorded as under:
Stores In Stock A/C PQR depot Dr
To Stores in Stock A/c ABC depot Cr
However, it may so happen that the receiving depot receives the vouchers but actual material has still not reached the depot due to delay in transit. In such case the receiving depot operates a temporary suspense account called ‘Stores in Transit’ which is accountd as under
Stores in Transit A/C of PQR depot Dr
To Stores in Stock A/C of PQR depot (-) Dr
On actual receipt of material by the dpot, the Stores in Transit account is reversed as under:
Stores in Stock A/C of PQR depot Dr
To Stores in Transit A/C of PQR depot Cr
4. Stock Adjustment Account: This suspense account is operated for recording differences arising out of;
1.) Variation in stock noticed during:
(a) Periodical Accounts Stock verification.
(b) Departmental stock verification.
2.) Variations in price of stock due to
(a) Change in price of products purchased from market.
(b) Change in price of products manufactured in workshop.
3.) Difference in Book Value and actual value realized on Scrap sale.
(i) Difference due to loss, theft obsolescence etc.
(iii) Loss on account of classification of new material as second hand
(iv) Rounding off
(v) Value brought on books through depot stock sheets pending receipt of vouchers.
The debits and credits to this account are posted separately and reconciled regularly so as to ensure that balance under this suspense account is cleared every six months. All items of small value which do not serve any useful purpose by keeping in SAA serve no useful purpose should be cleared to final heads. Items remaining uncleared at the end of each quarter , unless it is established by advanced enquiry that there is a possibility of their clearance in the next month or two should be reported to G.M. for obtaining orders as to the Heads of accounts to which they be debited or credited.
5. Miscellaneous advance Capital: Some of the stores stocked are not products ready for consumption by the users as these are in the form of raw material and need to be issued for fabrication before actual issue. Such issues when given for fabrication are temporarily lodged under the suspense head MAC. The value of the raw material issued is Dr. to MAC with corresponding credit to Stores in Stock A/c of the depot. When the material is fabricated and issued to users the value of such product (includes fabrication charges) is credited to MAC with corresponding debit to the user department. As the Credit in MAC is more than the debit, the same is cleared by way of payment of fabrication charges.
6. Sales Suspense: This suspense is opposite to that of Purchase suspense in its operation i.e., while Purchase Suspense is credited with value of material received, sales suspense is credited with scrap sold. When the scrap is sold in auction, the EMD and Balance Sale Value paid by the successful bidderare first placed at the credit of Sales suspense. This is done as there is atime gap between the sale of scrap and actual delivery of the material by the purchaser. The transactions are as under;
On receipt of MCR for EMD/BSV paid by the successful bidder
Remttance Into Bank A/C Dr
To Sales Suspense A/C Cr
On receipt of Issue note for having delivered the material
Sales Suspense A/C Dr
To stores in stock (scrap) A/C Cr
Sales suspense should always have a credit balance. A debit balance in stores in stock represents either material delivered without payment having received or material received in excess to the qty sold in auction. Only in case of sale to foreign Railways this account is debited first and when the foreign railway accepts the debit sales suspense is credited.