LESSON

GRADE 11
78
MANUFACTURING

WORKSHEET 7
ACCOUNTING PROCESS

The following diagram illustrates the flow of the

raw materials

(Raw Material stock)

from the store room

to the factory floor where goods are produced

(Work In Process stock)

and then the finished product to the show room

(Finished Goods stock)

78 Accounting Grade 11 - CAPS 1

 MANUFACTURING BUSINESS
manager

Storeroom with
raw materials

Factory floor where the products are

produced ( Work-In-Process )
Administration office

labour
(directly involved)

labour (indirectly involved)

Selling and distribution Showroom with finished(security)

goods
(cleaner) (foreman)
office (goods can now be sold)

78 Accounting Grade 11 - CAPS 2

78 Accounting Grade 11 - CAPS 3
Look at the diagram on the previous page. See the flow of the raw materials from the
storeroom (Raw Material Stock account)
to the
factory floor where the units are produced (Work-In-Process account).
From there the
finished goods go to the show room to be sold (Finished Goods account).

There are separate accounts for administration costs (Administration Cost account) and costs
for the selling department (Selling and Distribution cost account).

78 Accounting Grade 11 - CAPS 4

 LEDGER ACCOUNTS

NEW LEDGER ACCOUNTS:

•STOCK ACCOUNTS: •Direct / Raw material account

(Balance sheet accounts)
•COSTS ACCOUNTS:
•NOMINAL ACCOUNTS:
(these accounts will be closed off
to the COSTS ACCOUNTS at the
end of the financial year)
•Work in process account
•Finished Goods account
•Consumable Stores on hand account
•Direct/ Raw materials cost account
•Factory Overheads account
•Direct Labour account
•Selling and Distribution account
•Administration account
•Consumable stores
•Salaries
•Depreciation
•Telephone
•Raw materials issued

Remember!!!!!
In addition to the manufacturing accounts, there are two more operating activities:
Selling and distribution costs (separate account)
Administration costs (separate account)
These accounts have nothing to do with the manufacturing process and are closed off to
the Profit and loss account

78 Accounting Grade 11 - CAPS 5

 CALCULATION OF FACTORY COSTS ACCORDING TO FLOOR SPACE

EXAMPLE 4

INFORMATION:
Rent amounting to R200 000 was paid during the year. This amount must be divided in the
ratio 3:1:1 between the factory, the office and the sales department.

ANSWER

Factory Office Sales dept TOTAL

3 1 : 1 5
:
3 x 200 000 1 x 200 000 1 x 200 000
5 1 5 1 5 1
= 120 000 = 40 000 = 40 000 200 000

ACTIVITY 7

1NFORMATION:
7.1 Sundry expenses amounted to R25 000. This amount must be divided. Factory
accounts 80%, Office 5% and Sales department 15%

Factory Office Sales dept TOTAL

7.2 Rent is allocated on proportion to floor area. R72 000. Floor space: Factory 1 000 square
meters, Office 500 square meters, Sales department 500 square meters.

Factory Office Sales dept TOTAL

78 Accounting Grade 11 - CAPS 6

78 Accounting Grade 11 - CAPS 7
 RECORDING IN GENERAL LEDGER

EXAMPLE 5
REQUIRED
Use the information extracted from the books of Sun Manufacturers below to draw up the
following ledger accounts:
 Raw material stock account
 Direct materials cost account
 Work-In-Process stock account

INFORMATION
Balances in the accounts
1 March 2012 31 March 2013
Raw materials stock 18 000 20 000
Work-In-Process stock 6 000

Transactions for March 2013

Purchased raw materials
Cash R40 000
Credit R20 000
Carriage on purchases (paid cash) R2 000
Issued raw materials to the production department R60 000

ANSWER
GENERAL LEDGER OF SUN MANUFACTURERS
RAW MATERIAL STOCK
2013 2013
Mar 1 Balance b/d 18 000 Mar 31 Direct materials 60 000
cost
31 Bank 40 000 Balance c/d 20 000
Creditors control 20 000
Bank (carriage) 2 000
80 000 80 000
Apr 1 Balance b/d 20 000
DIRECT MATERIAL COST
2013 31 Raw material 2013 Work-In-
Mar stock 60 000 Mar 31 Process stock 60 000
60 000 60 000
Apr 1
WORK-IN-PROCESS STOCK
2013
Mar 1 Balance 6 000
31 Direct material
stock 60 000

78 Accounting Grade 11 - CAPS 8

 ACTIVITY 8

REQUIRED
Use the information extracted from the books of Sun Manufacturers below to draw up the
following ledger accounts:
 Raw material stock account
 Direct materials cost account
 Work-In-Process stock account

INFORMATION
Balances in the accounts
1 March 2012 31 March 2013
Raw materials stock 50 000 27 000
Work-In-Process stock 12 000

Transactions for March 2013

Purchased raw materials
Cash R35 000
Credit R27 000
Issued raw materials to the production department R85 000

ANSWER
GENERAL LEDGER OF SUN MANUFACTURERS

RAW MATERIAL STOCK

DIRECT MATERIAL COST

WORK-IN-PROCESS STOCK

78 Accounting Grade 11 - CAPS 9

EXAMPLE 6 (continuation of Example 5)

REQUIRED
Use the information extracted from the books of Sun Manufacturers below to draw up the
following ledger accounts:
 Raw material stock account
 Direct materials cost account
 Direct labour cost account
 Work-In-Process stock account

INFORMATION
Balances in the accounts
1 March 2012 31 March 2013
Raw materials stock 18 000 20 000
Work-In-Process stock 6 000

Transactions for March 2013

Direct labour: Gross wages R45000
Pension contribution R2 000
Medical Aid contribution R1 000
R48 000

ANSWER
GENERAL LEDGER OF SUN MANUFACTURERS
RAW MATERIAL STOCK
2013 2013 Direct materials
Mar 1 Balance b/d 18 000 Mar 31 cost 60 000
31 Bank 40 000 Balance c/d 20 000
Creditors control 20 000
Bank (carriage) 2 000
80 000 80 000
Apr 1 Balance b/d 20 000
DIRECT MATERIAL COST
2013 31 Raw material 2013 Work-In-
Mar stock 60 000 Mar 31 Process stock 60 000
60 000 60 000
Apr 1

78 Accounting Grade 11 - CAPS 10

 DIRECT LABOUR COST
2013 2013 Work-In-
Mar 31 Bank 45 000 Mar 31 Process stock 48 000
Pension
contributions 2000
Medical aid
contributions 1 000
48 000 48 000

WORK-IN-PROCESS STOCK
2013
Mar 1 Balance 6 000
31 Direct labour
stock 60 000

We will learn how to complete the Work-In-Process account as we continue

ACTIVITY 9

REQUIRED
Use the information extracted from the books of Sun Manufacturers below to draw up the
following ledger accounts:
 Direct labour cost account
 Work-In-Process stock account

INFORMATION
Balances in the accounts
1 March 2012 31 March 2013
Raw materials stock 29 000 15 000
Work-In-Process stock 13 000

Transactions for March 2013

Purchased raw materials
Cash R61 000
Carriage on purchases (paid cash) R 2 000
Issued raw materials to the production department R77 000
Direct labour: Gross wages R40 000
Pension contribution R 5 000
Medical Aid contribution R 2 000
R47 000

78 Accounting Grade 11 - CAPS 11

ANSWER
GENERAL LEDGER OF SUN MANUFACTURERS

RAW MATERIAL STOCK

DIRECT MATERIAL COST

DIRECT LABOUR COST

WORK-IN-PROCESS STOCK

78 Accounting Grade 11 - CAPS 12

 ANSWERS 78

ACTIVITY 7

7.1
Sundry expenses amounted to R25 000. Factory accounts for 80%, Office 5% and Sales
department 15%
Factory :office : sales dept R25 000
80% 5% 15%
80 x 25 000 5 x 25 000 15 x 25 000
100 100 100
= 20 000 = 1 250 = 3 750

7.2
Rent is allocated on proportion to floor area. R72 000. Floor space: Factory 1 000 square
meters, Office 500 square meters, Sales department 500 square meters.
Factory :office : sales dept R72 000
1 000 500 500 = 2 000 square meters
1 000 x 72 000 500 x 72 000 500 x 72 000
2 000 2 000 2 000
= 36 000 = 18 000 = 18 000

ACTIVITY 8
GENERAL LEDGER OF SUN MANUFACTURERS
RAW MATERIAL STOCK
2013 Balance b/d 50 000 2013 Direct material 85 000
Mar 1 Mar 31 cost
31 Bank 35 000 Balance b/d 27 000
Creditors control 27 000
112 000 1122 000
Apr 1 Balance b/d 85 000

DIRECT MATERIAL COST

2013 Raw material 85 000 2013 Work-in-process 85 000
Mar 31 stock Mar 31 stock

WORK-IN-PROCESS STOCK
2013 Balance b/d 12 000 2013
Mar 31 Mar 31
Direct material 85 000
cost

78 Accounting Grade 11 - CAPS 13

ACTIVITY 9

GENERAL LEDGER OF SUN MANUFACTURERS

RAW MATERIAL STOCK
2013 2013 Direct materials
Mar 1 Balance b/d 29 000 Mar 31 cost 77 000
31 Bank 61 000 Balance c/d 15 000
Bank (carriage) 2 000
92 000 92 000
Apr 1 Balance b/d 15 000
DIRECT MATERIAL COST
2013 31 Raw material 77 000 2013 Work-In- 77 000
Mar stock Mar 31 Process stock
77 000 77 000
Apr 1
DIRECT LABOUR COST
2013 2013 Work-In-
Mar 1 Bank 40 000 Mar 31 Process stock 47 000
Pension
contributions 5 000
Medical aid
contributions 2 000
47 000 47 000

WORK-IN-PROCESS STOCK
2013 Balance b/d 13 000 2013
Mar 31 Mar 31
Direct material
cost 77 000
Direct labour
cost 47 000

78 Accounting Grade 11 - CAPS 14