Materials returned to vendors may be recorded on the invoice price or in accordance with the method adopted for pricing out material issues.
Recording of materials returned at invoice price is not realistic. This is because the price per unit that a vendor grants on the return of materials cannot be the same as the original invoice cost.
Adjustments for discount, freight, carriage inward, etc., must be made to arrive at the same time. Returns should be valued using the same method adopted for pricing out material issues, and then entered in the Issued Column in the stores ledger.
Pricing of Surplus Materials Returned to Store
Sometimes, the materials that a department requisitions may not be used in full. In such cases, the surplus needs to be returned to the stores.
The first option is to record the materials returned to stores at the price at which they were originally issued and to re-issue them at the same price on the next requisition.
The second option is to value the return of surplus at the original issue price and to treat it as an item of a new purchase in the Received Column of the stores ledger.
Treatment of Shortage of Materials
If any shortage of materials is noted on making a physical verification of stock of materials, it should be entered in the Issued Column of the stores ledger and valued in accordance with the method adopted for pricing out material issues.