PRINCIPLES OF ACCOUNTS MANUFACTURING ACCOUNTS
PRESENTED BY: MFUTA FM KABUNDI HIGH SCHOOL
The manufacturer is involved or engaged in business of purchasing raw-materials and converting them into finished products which are later sold.
The manufacturer is specially concerned with the costs of manufacturing incurred in the manufacturing process
Therefore. the manufacturing account is concerned with ascertaining the cost of production
a manufacturing account is prepared in addition to the trading and profit and loss account
. for these firms.MANUFACTURING ACCOUNTS
Stock of finished goods
. a Book-keeper is expected to have three stocks as opening stock. Stock of work-in-progress c. These are: a.MANUFACTURING ACCOUNTS
Therefore. Stock of Raw-materials b.
These three stocks will appear in the Balance Sheet as assets of the business The preparation of this account requires the recognition of two types of factory costs.MANUFACTURING ACCOUNTS
NB. They are:
1) DIRECT COSTS
These are the first costs to be incurred since they are directly involved in the production of goods e. raw materials.g. carriage on raw materials. factory wages. direct expenses etc
2) INDIRECT COSTS
These are the costs which are not directly embodied in the production but are necessary to the production process e. Factory rates. Factory lighting and heating.g. Factory Wages. Factory fuel and power etc
. Factory rent.
therefore. is divided into two sections: The first one is the Prime Cost and the second one is the Cost of goods manufactured or produced commonly known as the Cost of Production
The manufacturing account.
2008. Kabanda. prepare the manufacturing account for the year ended 31th December. a manufacturer of Electronic goods.EXAMPLE 1
From the following particulars extracted from the books of W.
1 Jan 2008 stock of raw materials 80 000 31 Dec 2008 stock of raw materials 105 000 1 Jan 2008 work-in-progress 35 000 31 Dec 2008 work-in-progress 42 000 Wages: Direct 396 000 Indirect 255 000 Purchases of raw materials 870 000
Fuel and power 99 000 Direct expenses 14 000 Lubricants 30 000 Carriage inwards on raw materials 20 000 Factory rent 72 000 Depreciation of factory plant and Machinery 42 000
Insurance of factory building and Plant 150 000 General factory expenses 33 000 Factory internal transport Expenses 18 000
M. Total cost of R Materials K K K 80 000 870000 950000 20000 970000
.M. KABANDA MANUFACTURING ACCOUNTS AS AT 31 DECEMBER. Add: Carriage on R. M. 2008
Opening stock of R.SOLUTION
W. Add: Purchases of R.
Materials Cost of RM Consumed Add: Direct expenses Direct Wages Direct expenses Total D.SOLUTION
Less: Closing stock of R. expenses PRIME COST 105000 865000 396000 14000 410000 1275000
Add: Indirect expenses Fuel and Power Indirect expenses Lubricants Rent Depreciation of plant Internal transport Insurance General Factory Exp. Total Overhead Exp. 99000 255000 30000 72000 42000 18000 150000 33000 699000
1974000 Add: work-in-progress 1/01/08 Less: work-in-progress 31/12/08 Cost of PRODUCTION 35000 2009000 42000 1967000
Stocks at 1/01/08 Raw materials 285 000 Work-in-progress 243 100 Purchases of R Materials 467 000
. The following figures relating to the year 2008 have been taken from the books of Chibwe Jackson. a manufacturer of mealie meal.EXERCISE
light & heating 163 000 Depreciation of plant & machine 38 000 Warehouse charges & expenses 45 000 Royalties 150 000 General Factory expenses 38 000
Carriage on Raw Materials 6 400 Direct factory wages 396 000 Factory power.
Stocks at 31/12/08 Raw Materials 268 000 Work-in-progress 274 000 REQUIRED Prepare the manufacturing account as at 31/12/08