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Financial Accounting 2
Manufacturing
Accounts
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BM020-3-1 FA2 Manufacturing Accounts
Learning Outcomes
To explain to calculate prime cost &
production cost of goods manufactured.
To dra up a manufacturing account andincome statement.
To ad!ust t"e manufacturing account in
respect of or#-in-progress.
$lide 1 of 20
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BM020-3-1 FA2 Manufacturing Accounts
Manufacturing Accounts
%sed for usinesses "ic" are manufacturers.
A manufacturing account is prepared in
addition to t"e income statement.
't is product for internal use only.
T"e manufacturing accounts is used to calculate
& s"o t"e cost of manufacturing t"ose goods.
T"e figure it produces t"at is used in t"e Tradingaccount is #non as t"e production cost.
$lide 3 of 20
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BM020-3-1 FA2 Manufacturing Accounts
(i)isions of costs
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BM020-3-1 FA2 Manufacturing Accounts
(irect and indirect costs
T"e sum of all t"e direct costsis #non as t"e
prime cost.
A cost t"at cannot e easil* traced to t"e item eing
manufactured is #non as an indirect cost.
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BM020-3-1 FA2 Manufacturing Accounts
'ndirect manufacturing costs
+xamples are,
ages of cleaners
ages of crane dri)ers
ent of a factor*
(eprecation of plant and mac"iner*
/osts of operating for#lift truc#s
Factor* poer
Factor* lig"ting.
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Format of manufacturing account
T"is is deited it" t"e production cost of
goods completed during t"e accounting
period. 't contains costs of,
(irect materials
(irect laour
(irect expenses
'ndirect manufacturing costs.
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Format of trading account
T"is account includes,
roduction cost roug"t don from t"emanufacturing account
pening and closing in)entor* of finis"ed goods
$ales.
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Manufacturing Accounts
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Manufacturing Accounts+xample 1.
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Manufacturing Accounts
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Manufacturing Accounts
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Format of profit and loss account
T"is includes,
ross profit roug"t don from t"e tradingaccount
All administration expenses
All selling and distriution expenses
All financial c"arges.
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Manufacturing Accounts
+xample 2
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Manufacturing Accounts
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Manufacturing Accounts
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Q & A
Question and Answer Session
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M f t i A t
Ratio Analysis and Interpretation
What we will cover next