Data Dictionary

Item Number J850
OTHER ASSETS: PREPAID EXPENSES: MATERIALS AND SUPPLIES

Call confidentiality applies to FFIEC 031/041.

Series Start Date End Date Confidential? Reporting Forms
FRBSJ850 1989-12-31 9999-12-31 Yes FR 34

Data Description:

This account is used to record the cost of materials, forms and supplies such as remote-access tokens which are carried in the Bank's general stock for release over future periods as well as the spare parts inventory for the BPS-3000 currency processors. Items which are purchased for immediate delivery to the requesting department, such as weapons and ammunition for the police force, food for the cafeteria, currency and coin pouches for the money department, books and pamphlets for the library, public information displays, etc., should not be included unless the purchases are clearly for inventory. Items purchased for direct usage, however may be posted to this account when such posting and simultaneous withdrawal facilitates inventory control. Freight charges should be reflected in the cost of supplies purchased, whether for inventory or direct usage. When impracticable to distribute freight charges over a number of items, the cost may be applied to the largest item(s) of purchase. Freight charges billed separately, and that relate to items already in inventory, may be charged to expense. The treatment of freight charges billed separately must be consistent throughout the District (i.e., either all such charges must be charged to expense, or all such charges must continue to be capitalized).

Appropriate records should be maintained to assure that the cost of materials and supplies in actual inventory, along with materials and supplies that have been delivered to operating departments during a month, may be verified against the balance sheet. Separate subsidiary accounts should be maintained to record supplies issued during the month and the appropriate expense entries should be made by month-end. A physical inventory of materials and supplies should be conducted at least annually and any necessary adjusting entries made to expense. Items which become obsolete or which have only limited use over future periods, such as an unused supply of a monthly bulletin issued two months earlier, should be expensed unless the Reserve Bank feels that the demand for the item is likely to recur at a pace that justifies the continued recordkeeping. In the case of supplies that are sold out of inventory, the offsetting entry should be made to cash, items in process of collection, or other designated payment medium.

Purchases for future consumption should be uniformly debited to this account and expensed by the last business day of the month based on the supplies actually used during the month, and the average cost of such supplies should always be used in calculating the expense charge. A possible method of determining average cost is as follows:

- The average cost of each supply item should be calculated by dividing the total cost of the items on hand by the number of units on hand. Upon receipt of a new shipment, the cost of the items received should be added to the previous total cost of the items on hand, the units should be added to the existing quantity, and the new total cost should be divided by the new quantity to arrive at the new average cost. Supplies should be issued at the established average cost until the next shipment is received.

The salaries and related expenses which are incurred within the Bank on duplicating and printing forms, stationery, pamphlets, etc., or on making parts or other items of supply, may also be debited to the account and deferred to the month of actual usage, provided senior management has approved a policy for capitalizing such costs.

The following are illustrations of possible methods to account for different types of inventory transactions:
- 5,000 note pads, of which none was in stock on January 1, are purchased on January 10 for $500 or 10 cents each and another 5,000 are purchased on January 25 for $600 or 12 cents each. On January 31 it is determined that 8,000 pads were requisitioned from stock. A credit of $880 is made against the prepaid account and a debit is made to expenses, based on the average cost of 11 cents for the 8,000 pads that were actually used. In February 10,000 pads are purchased for $1,000, making an average cost of 10.17 cents to be applied against February requisitions.

- A one year's stock of accounting forms is printed internally by a Reserve Bank which has a policy of capitalizing in-house jobs costing more than $1,000. The cost of paper, previously debited to the prepaid account, amounts to $2,000 and salaries and other expenses incurred in printing and binding amount to $6,000. The $2,000 for the stock paper is credited to the prepaid expense account and charged to expenses of the Printing and Duplicating activity when the items are withdrawn from supplies. The $2,000 and the $6,000 are subsequently debited to the prepaid account upon completion of the job and an offsetting credit is made to the contra expense account. The $8,000 then would be the basis for determining the unit cost which will be used to charge expenses when the item is issued from stock.

- The annual report of the Bank is printed in February. Two-thirds of the copies are distributed immediately and all but 100 of the remaining copies are distributed and expensed in succeeding months of the year. The 100 remaining copies are charged to expenses at the end of the year, since continued record keeping would serve no useful purpose.

Do not average or otherwise commingle costs for different publications or
products that are designed for consumption over different years. For example, the cost of any remaining copies of a specific publication covering the period through 1977 should not be added to the cost of an updated version of that publication which is released beginning in 1980, but should be expensed promptly.

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Last update: Mar 20, 2024