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    FA 2 Chapter 11 Manufacturing Accounts

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    Mhd Amin
    The document discusses manufacturing accounts. It explains that manufacturing accounts are used by manufacturing businesses to calculate the cost of goods manufactured. It breaks down costs into prime costs (direct costs) and production costs (prime costs plus indirect manufacturing costs). The manufacturing account shows the costs of production and feeds into the trading account. The trading account includes production costs, opening and closing inventory, and sales. Finally, the profit and loss account includes the gross profit from the trading account as well as all expenses. Examples are provided to illustrate the format and entries in manufacturing accounts.

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    © All Rights Reserved
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    FA 2 Chapter 11 Manufacturing Accounts

    Uploaded by

    Mhd Amin
    171 views20 pages
    The document discusses manufacturing accounts. It explains that manufacturing accounts are used by manufacturing businesses to calculate the cost of goods manufactured. It breaks down costs into prime costs (direct costs) and production costs (prime costs plus indirect manufacturing costs). The manufacturing account shows the costs of production and feeds into the trading account. The trading account includes production costs, opening and closing inventory, and sales. Finally, the profit and loss account includes the gross profit from the trading account as well as all expenses. Examples are provided to illustrate the format and entries in manufacturing accounts.

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    The document discusses manufacturing accounts. It explains that manufacturing accounts are used by manufacturing businesses to calculate the cost of goods manufactured. It breaks down costs into prime costs (direct costs) and production costs (prime costs plus indirect manufacturing costs). The manufacturing account shows the costs of production and feeds into the trading account. The trading account includes production costs, opening and closing inventory, and sales. Finally, the profit and loss account includes the gross profit from the trading account as well as all expenses. Examples are provided to illustrate the format and entries in manufacturing accounts.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    171 views20 pages

    FA 2 Chapter 11 Manufacturing Accounts

    Uploaded by

    Mhd Amin
    The document discusses manufacturing accounts. It explains that manufacturing accounts are used by manufacturing businesses to calculate the cost of goods manufactured. It breaks down costs into prime costs (direct costs) and production costs (prime costs plus indirect manufacturing costs). The manufacturing account shows the costs of production and feeds into the trading account. The trading account includes production costs, opening and closing inventory, and sales. Finally, the profit and loss account includes the gross profit from the trading account as well as all expenses. Examples are provided to illustrate the format and entries in manufacturing accounts.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 20

    Financial Accounting 2

    Manufacturing
    Accounts

    Learning Outcomes
    To explain to calculate prime cost &
    production cost of goods manufactured.
    To draw up a manufacturing account and
    income statement.
    To adjust the manufacturing account in
    respect of work-in-progress.

    BM020-3-1 FA2

    Manufacturing Accounts

    Slide 1 of 20

    Manufacturing Accounts
    Used for businesses which are manufacturers.
    A manufacturing account is prepared in
    addition to the income statement.
    It is product for internal use only.
    The manufacturing accounts is used to calculate
    & show the cost of manufacturing those goods.
    The figure it produces that is used in the Trading
    account is known as the production cost.

    BM020-3-1 FA2

    Manufacturing Accounts

    Slide 3 of 20

    Divisions of costs

    BM020-3-1 FA2

    Manufacturing Accounts

    Direct and indirect costs


    The sum of all the direct costs is known as the
    prime cost.
    A cost that cannot be easily traced to the item being
    manufactured is known as an indirect cost.

    BM020-3-1 FA2

    Manufacturing Accounts

    Indirect manufacturing costs


    Examples are:

    BM020-3-1 FA2

    Wages of cleaners
    Wages of crane drivers
    Rent of a factory
    Deprecation of plant and machinery
    Costs of operating forklift trucks
    Factory power
    Factory lighting.
    Manufacturing Accounts

    Format of manufacturing account


    This is debited with the production cost of
    goods completed during the accounting
    period. It contains costs of:

    BM020-3-1 FA2

    Direct materials
    Direct labour
    Direct expenses
    Indirect manufacturing costs.
    Manufacturing Accounts

    Format of trading account


    This account includes:
    Production cost brought down from the
    manufacturing account
    Opening and closing inventory of finished goods
    Sales.

    BM020-3-1 FA2

    Manufacturing Accounts

    Manufacturing Accounts

    BM020-3-1 FA2

    Manufacturing Accounts

    Slide 1 of 13

    Manufacturing Accounts
    Example 1.

    BM020-3-1 FA2

    Manufacturing Accounts

    Slide 10 of 20

    Manufacturing Accounts

    BM020-3-1 FA2

    Manufacturing Accounts

    Slide 11 of 20

    Manufacturing Accounts

    BM020-3-1 FA2

    Manufacturing Accounts

    Slide 12 of 20

    Format of profit and loss account


    This includes:
    Gross profit brought down from the trading
    account
    All administration expenses
    All selling and distribution expenses
    All financial charges.

    BM020-3-1 FA2

    Manufacturing Accounts

    Manufacturing Accounts
    Example 2

    BM020-3-1 FA2

    Manufacturing Accounts

    Slide 14 of 20

    Manufacturing Accounts

    BM020-3-1 FA2

    Manufacturing Accounts

    Slide 15 of 20

    BM020-3-1 FA2

    Manufacturing Accounts

    Slide 16 of 20

    Manufacturing Accounts

    BM020-3-1 FA2

    Manufacturing Accounts

    Slide 17 of 20

    Manufacturing Accounts

    BM020-3-1 FA2

    Manufacturing Accounts

    Slide 18 of 20

    Question and Answer Session

    Q&A
    BM020-3-1 FA2

    Manufacturing Accounts

    Slide 19 of 20

    What we will cover next

    Ratio Analysis and Interpretation

    BM020-3-1 FA2

    Manufacturing Accounts

    Slide 20 of 20

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