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98 CHAPTER 4 The Procurement Process

Figure 4-10: Purchase for stock vs. consumption

The right side of the fi gure shows that, for consumable materials, an
account assignment category and specifi c account assignment objects, such as
a cost center, must be provided when the purchase order is created. The data
provided by the user determine which general ledger accounts (e.g., consump-
tion account) will be used during the process. Consumable materials may or
may not have a material master. If material master data exist, then two options
are available. In one, the company doesn’t track the quantity of the material
in inventory; in the other, it does. It is important to remember, however, that
the company can track only the quantity of inventory on hand. The value of
inventory cannot be tracked because a consumption account (refer to Chapter
3), such as supplies expenses, rather than an inventory account is used in the
purchasing process.
Finally, the middle of the fi gure illustrates the scenario in which materials
that are typically purchased to stock are sometimes purchased for consumption.
For example, GBI normally purchases helmets to resell to its customers; that
is, it purchases them to stock. However, GBI occasionally purchases helmets
to be distributed as gifts at trade shows. In these cases the transactions are
considered purchases for consumption rather than for stock. Consequently,

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