Manufacturing Account

The manufacturing account is prepared to determine the cost of goods manufactured. It includes all the direct costs incurred in the production process. The manufacturing account is divided into two parts - the debit side and the credit side.

Debit Side of Manufacturing Account
1. Opening Stock of Raw Materials: It represents the value of raw materials available at the beginning of the accounting period.
2. Purchases of Raw Materials: It includes the cost of raw materials purchased during the accounting period.
3. Direct Wages: It represents the wages paid to the workers directly involved in the production process.
4. Factory Rent: It includes the rent paid for the factory premises where the production takes place.
5. Factory Lighting and Heating: It represents the expenses incurred for lighting and heating the factory.
6. Factory Power: It includes the cost of electricity consumed in the factory.
7. Indirect Materials: It represents the cost of materials used indirectly in the production process, such as lubricants, cleaning agents, etc.
8. Indirect Wages: It includes the wages paid to the workers indirectly involved in the production process, such as supervisors, maintenance staff, etc.
9. Depreciation of Machinery: It represents the wear and tear of machinery used in the production process.
10. Factory Insurance: It includes the insurance premium paid for insuring the factory premises and machinery.

Credit Side of Manufacturing Account
1. Closing Stock of Raw Materials: It represents the value of raw materials remaining at the end of the accounting period.
2. Direct Expenses: It includes the expenses directly related to the production process, such as carriage inwards, customs duty, etc.
3. Cost of Goods Manufactured: It is calculated by subtracting the closing stock of raw materials from the total of the debit side. It represents the total cost of goods produced during the accounting period.

Trading and Profit and Loss Account

The trading and profit and loss account is prepared to determine the net profit or net loss of the business. It includes all the indirect expenses and revenues of the business. The trading and profit and loss account is also divided into two parts - the debit side and the credit side.

Debit Side of Trading and Profit and Loss Account
1. Opening Stock: It represents the value of goods available at the beginning of the accounting period.
2. Purchases: It includes the cost of goods purchased for resale during the accounting period.
3. Direct Expenses: It includes the expenses directly related to the purchase of goods, such as carriage inwards, customs duty, etc.
4. Manufacturing Expenses: It represents the cost of goods manufactured, which is transferred from the manufacturing account.
5. Indirect Expenses: It includes all the other expenses incurred in running the business, such as rent, salaries, advertising, etc.

Credit Side of Trading and Profit and Loss Account
1. Sales: It represents the total revenue generated from the sale of goods.
2. Closing Stock: It represents the value of goods remaining at the end of the accounting period.
3. Gross Profit: It is calculated by subtracting the cost of goods sold from the net sales. It represents the profit earned from the core operations of the business.
4. Indirect Incomes: It includes all the other incomes earned by the business, such as rent received, interest received, etc.
5. Net Profit: