MANUFACTURING ACCOUNTS

Types of Costs
1. Direct Costs (Prime Cost)

They vary directly with the production. For example, cost of raw
materials and cost of labour directly involved in the production.

Royalty & License fees is another example of direct costs.

2. Indirect Costs (Factory Overheads)

These costs do not vary directly with the production. For examples,
wages of cleaners, security guard, factory supervisors, factory managers.
Another examples include factory depreciation, machinery depreciation,
rents, rates, insurance etc.
 (Name of the Business/Owner)
MANUFACTURING ACCOUNTS
For the year ended 31 Dec 2025
$ $
Opening inventory of raw materials x
Add Purchases of raw materials x
Add Carriage on raw materials x
Less Closing inventory of raw materials (x)
Cost of raw materials consumed xx
Direct Labour/Factory wages xx
Royalty fees/License fees/Direct expense xx
Prime Cost (total of direct costs) xxx
Factory Overheads
Manager’s/supervisor’s salary x
Depreciation: Machine x
: Building x
Rent & Rates x
Fuel and heating x xx
Xxx
Add inventory of opening work in progress xx
Less inventory of closing work in progress (xx)
Cost of Production xxx
 INCOME STATEMENT (EXTRACT)
$ $
Revenue xxx
Opening Inventory of finished goods xx
Cost of Production xx
Add Purchases xx
Less Closing Inventory finished goods (xx)
Cost of sales xxx

STATEMENT OF FINANCIAL POSITION (EXTRACT)

$ $ $
Current Assets
Inventory: Raw-material x
Work in progress x
Finished goods x x