Direct material

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Direct material
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The direct material - stock used in production of items. Essential component in production process. Created on one's own or purchased from contractor. They are wearing out entirely in one workflow (National Association of Accountants 1986, s. 2).

The direct materials have features which distinguish them from the concept of commodity (Caplan D. 2006, s. 57-59):

  • the necessity of performing production process pursuant to schedule exists,
  • the possibility of bulk transport provides discounts for enterprise,
  • the possibility of storing as safety supply exists.

The difference between finished commodity and the direct material

Commodities – purchased from contractor in order to further resale. The possibility of one's own goods creation with contemporaneous purpose for bulk sale or retail environment exists. The characteristic feature of commodities is the fact, that they are selling in immutable form. The possibility of its sorting or proper packing exists (National Council of Educational Research and Training 2013, s. 17).

Classification of the direct materials

From the point of view of an enterprise among materials we can distinguish (The Institute of Cost Accountants of India 2014, s.308):

  • fundamental materials – it shows the direct way of use i.e. the wood for furniture production. The fundamental packaging being indispensable part of a product i.e. bottle of a drink are also counted among fundamental materials..
  • subsidiary materials – finishing materials, materials allowing permanent connection of individual parts, office materials.
  • fuel – used in different purposes i.e. technological, economic or propulsive.
  • spare parts of machines and devices – connected with exchange of old parts.
  • packages – used for storage of products which are not integral part of a material.
  • waste – oddments arsed form production.

Materials and commodities appraisal

Materials as well as commodities are prepossessing in account books at cost price. Nevertheless, enterprise has a possibility of purchased materials and commodities appraisal by its price as long as it influences on an assets and financial result value. Two ways of materials and commodities appraisal might be distinguished (National Association of Accountants 1986, s. 3):

  • by real price of purchase – consists of amount receivable for vendor without deducting taxes from commodities and services as well as excise tax. The price is compounded by public burdens.
  • by real price of obtain – consists of amount receivable for vendor without excise tax as well as without possibility of tax from commodities and services deducting. The price is compounded by costs connected with transport, embarkation and storage.
  • by selling price – price comparable with similar or the same sort of article.
  • by planned price – price prearranged by enterprise.
  • by cost of creation – price contain costs providing direct relation with a product.

Register of materials and commodities

For purposes of register of materials and commodities the following accounting evidences are used (Baskerville P. (n.d.), s.3):

  • VAT invoice – purchase document,
  • Pz document – adopting materials from outside i.e. the purchase of materials and its admission to a warehouse.
  • Pw document – adopting materials from inside i.e. elimination of tangible assets,
  • Wz document – materials issue outside,
  • Rw document – materials expenditure for internal needs,
  • Mn document – relocation of materials between warehouses,
  • stocktaking protocolinformation about excess or deficiency per diem of stocktaking.


Author: Justyna Zalewska