Principles of Accounting: The format of Manufacturing Accounts

////Principles of Accounting: The format of Manufacturing Accounts

Principles of Accounting: The format of Manufacturing Accounts

ZIMSEC O Level Principles of Accounting: The structure of Manufacturing Accounts

  • In the other post we introduced you to manufacturing accounts
  • In this post we will look at typical formats of manufacturing accounts
  • This is not to say there are different formats, no
  • We are merely going to present a simple manufacturing account
  • Followed by one that incorporates the idea of work in progress
  • Finally we will look at the issue of manufacturing profit and loss
  • We will not use figures at this point as the goal is to familiarize you with the format manufacturing accounts

Simple manufacturing account

J Kombamiti
Manufacturing Account for the year ended 31 December 20×8
$$
Opening stock of raw materialsxxxx
Add Purchases of raw materialxxx
Freight on raw materialsxxx
Import duty on raw materials

xxx

xxxx
Less Purchase Returns

(xx)

xxxxx

Less Closing Stock of raw materials

(xxx)

Cost of raw materials consumedxxxxx
Add Direct Labourxxxx
Royalties

xxx

Prime Costxxxxxx
Add Factory overhead
Indirect labourxxx
Factory supervisionxxx
Factory electricity and waterxxx
Provision for depreciation for plant and machineryxxx
Factory repairs and maintainance

xxx

xxxxx
Production cost of goods c/d (transferred to Trading account)

xxx

NB

  • These is just a typical template if items shown here are not in the question then you can omit them altogether. For example in the first year of manufacturing there is no opening stock of raw materials so don’t show an empty line simply omit the entire raw materials. You can also omit Import duty where there is no import duty.
  • This is a simple manufacturing account where there is no work in progress.
  • You can also add or remove overhead costs depending with the question

Manufacturing Account showing opening and closing work in progress

J Kombamiti
Manufacturing Account for the year ended 31 December 20×8
$$
Opening stock of raw materialsxxxx
Add Purchases of raw materialxxx
Freight on raw materialsxxx
Import duty on raw materials

xxx

xxxx
Less Purchase Returns

(xx)

xxxxx

Less Closing Stock of raw materials

(xxx)

Cost of raw materials consumedxxxxx
Add Direct Labourxxxx
Royalties

xxx

Prime Costxxxxxx
Add Factory overhead
Indirect labourxxx
Factory supervisionxxx
Factory electricity and waterxxx
Provision for depreciation for plant and machineryxxx
Factory repairs and maintainance

xxx

xxxxx
Add opening work in progress

xxx

xxxxx
Less closing working progress(xxx)
Production cost of goods c/d (transferred to Trading account)

xxx

Manufacturing and Income Statement showing manufacturing profit

J Kombamiti
Manufacturing and Trading Account for the year ended 31 December 20×8
$$
Opening stock of raw materialsxxxx
Add Purchases of raw materialxxx
Freight on raw materialsxxx
Import duty on raw materials

xxx

xxxx
Less Purchase Returns

(xx)

xxxxx

Less Closing Stock of raw materials

(xxx)

Cost of raw materials consumedxxxxx
Add Direct Labourxxxx
Royalties

xxx

Prime Costxxxxxx
Add Factory overhead
Indirect labourxxx
Factory supervisionxxx
Factory electricity and waterxxx
Provision for depreciation for plant and machineryxxx
Factory repairs and maintainance

xxx

xxxxx
Add opening work in progress

xxx

xxxxx
Less closing working progress(xxx)
Production cost of goods

xxx

Market value of goods completed c/dxxxxxx
Less Production cost of goods(xxxxxx)
Gross profit on manufacture c/d

xxx

Trading Account
Salesxxxxx
Less Cost of Sales
Opening stock of finished goodsxxxx
Add Market value of goods completed b/d

xxxxxx

xxxxx
Less closing stock of finished goods

(xxx)

(xxxxx)
Gross Profit on trading c/d

xxx

Gross Profit on manufacturing b/dxxxx
Gross Profit on trading b/d

xxx

xxxxx

NB:

  • The last layout is more complicated but it shows the portion of gross profit that is attributable to manufacturing and the one attributable to the business’s trading activities.
  • It is is unlikely you will encounter a question involving manufacturing profits as it will lead to a host of other issues that are beyond the scope of Ordinary level

To access more topics go to the Principles of Accounts Notes.

By |2018-02-19T10:23:52+00:00February 19th, 2018|Notes, Ordinary Level Notes, Principles of Accounts Notes|Comments Off on Principles of Accounting: The format of Manufacturing Accounts

About the Author:

He holds an Honours in Accountancy degree from the University of Zimbabwe. He is passionate about technology and its practical application in today's world.
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