Manufacturing Account

CONTENTS:

• Introduction to manufacturing account
• Purpose of manufacturing account
• Definition of terms used in manufacturing account
• Layout of manufacturing account
• Worked examples of manufacturing account

INTRODUCTION TO MANUFACTURING ACCOUNT

Manufacturing accounts are prepared by manufacturing companies to show the cost of goods produced. The activities of such organizations go beyond buying and selling into the production of certain goods. The manufacturing account is prepared before the trading and profit and loss account. The combination of all the accounts is referred to as manufacturing, trading, and profit and loss account.

Purpose of manufacturing account

1. It is prepared to show the cost of production
2. To monitor the production process at a low cost
3. To monitor the raw materials, stock and work –in-progress stocks
4. To accumulate all direct costs and indirect costs separately
5. It shows separately prime cost, factory cost and direct wages on manufacturing.

DEFINITION OF TERMS IN MANUFACTURING ACCOUNT

1. Cost of production

This is the total expenditure incurred in the production of output.