Summary: Final Accounts of Manufacturing Entities | Accounting for CA Foundation PDF Download

Manufacturing Account

When determining the cost of manufacturing goods, the Manufacturing Account comes into play. The key aspects of a Manufacturing Account include the following:

It records all expenses associated with the manufacturing of goods. Within this account, various costs such as freight on raw material purchases, customs duty, wages, rent, and factory building lighting are debited. Additionally, expenses like plant and machinery repairs, machinery depreciation, and loose tools are also debited to the manufacturing account.

Instead of presenting separate figures for opening stock, purchases, and closing stock, the Manufacturing Account focuses on showcasing the value of materials consumed.

The initial entry for work-in-progress comprises a debit to the opening stock, while a credit is assigned to the closing stock of work-in-progress. The conventional approach to valuing work in progress involves considering the actual materials used, labor expended on these unfinished goods, and a proportional share of manufacturing expenses, typically based on labor.

During the manufacturing process, some waste material inevitably arises. When these materials are sold, the realized amount is credited to the "Scrap Account." This account is then transferred to the credit side of the Manufacturing Account.

The balance within the Manufacturing Account, representing the disparity between the debit and credit sides, denotes the cost of goods produced during the period. This cost is subsequently transferred to the debit side of the Trading Account.