ZIMSEC O Level Principles of Accounting: The structure of Manufacturing Accounts
- In the other post we introduced you to manufacturing accounts
- In this post we will look at typical formats of manufacturing accounts
- This is not to say there are different formats, no
- We are merely going to present a simple manufacturing account
- Followed by one that incorporates the idea of work in progress
- Finally we will look at the issue of manufacturing profit and loss
- We will not use figures at this point as the goal is to familiarize you with the format manufacturing accounts
Simple manufacturing account
J Kombamiti
Manufacturing Account for the year ended 31 December 20×8
| $ | $ | |
| Opening stock of raw materials | xxxx | |
| Add Purchases of raw material | xxx | |
| Freight on raw materials | xxx | |
| Import duty on raw materials | xxx | |
| xxxx | ||
| Less Purchase Returns | (xx) | |
xxxxx |
||
| Less Closing Stock of raw materials | (xxx) |
|
| Cost of raw materials consumed | xxxxx | |
| Add Direct Labour | xxxx | |
| Royalties | xxx |
|
| Prime Cost | xxxxxx | |
| Indirect labour | xxx | |
| Factory supervision | xxx | |
| Factory electricity and water | xxx | |
| Provision for depreciation for plant and machinery | xxx | |
| Factory repairs and maintainance | xxx | |
| xxxxx | ||
| Production cost of goods c/d (transferred to Trading account) | xxx |
|
NB
- These is just a typical template if items shown here are not in the question then you can omit them altogether. For example in the first year of manufacturing there is no opening stock of raw materials so don’t show an empty line simply omit the entire raw materials. You can also omit Import duty where there is no import duty.
- This is a simple manufacturing account where there is no work in progress.
- You can also add or remove overhead costs depending with the question
Manufacturing Account showing opening and closing work in progress
J Kombamiti
Manufacturing Account for the year ended 31 December 20×8
| $ | $ | |
| Opening stock of raw materials | xxxx | |
| Add Purchases of raw material | xxx | |
| Freight on raw materials | xxx | |
| Import duty on raw materials | xxx | |
| xxxx | ||
| Less Purchase Returns | (xx) | |
xxxxx |
||
| Less Closing Stock of raw materials | (xxx) |
|
| Cost of raw materials consumed | xxxxx | |
| Add Direct Labour | xxxx | |
| Royalties | xxx |
|
| Prime Cost | xxxxxx | |
| Indirect labour | xxx | |
| Factory supervision | xxx | |
| Factory electricity and water | xxx | |
| Provision for depreciation for plant and machinery | xxx | |
| Factory repairs and maintainance | xxx | |
| xxxxx | ||
| Add opening work in progress | xxx |
|
| xxxxx | ||
| Less closing working progress | (xxx) | |
| Production cost of goods c/d (transferred to Trading account) | xxx |
|
Manufacturing and Income Statement showing manufacturing profit
J Kombamiti
Manufacturing and Trading Account for the year ended 31 December 20×8
| $ | $ | |
| Opening stock of raw materials | xxxx | |
| Add Purchases of raw material | xxx | |
| Freight on raw materials | xxx | |
| Import duty on raw materials | xxx | |
| xxxx | ||
| Less Purchase Returns | (xx) | |
xxxxx |
||
| Less Closing Stock of raw materials | (xxx) |
|
| Cost of raw materials consumed | xxxxx | |
| Add Direct Labour | xxxx | |
| Royalties | xxx |
|
| Prime Cost | xxxxxx | |
| Indirect labour | xxx | |
| Factory supervision | xxx | |
| Factory electricity and water | xxx | |
| Provision for depreciation for plant and machinery | xxx | |
| Factory repairs and maintainance | xxx | |
| xxxxx | ||
| Add opening work in progress | xxx |
|
| xxxxx | ||
| Less closing working progress | (xxx) | |
| Production cost of goods | xxx |
|
| Market value of goods completed c/d | xxxxxx | |
| Less Production cost of goods | (xxxxxx) | |
| Gross profit on manufacture c/d | xxx |
|
| Trading Account | ||
| Sales | xxxxx | |
| Less Cost of Sales | ||
| Opening stock of finished goods | xxxx | |
| Add Market value of goods completed b/d | xxxxxx | |
| xxxxx | ||
| Less closing stock of finished goods | (xxx) | |
| (xxxxx) | ||
| Gross Profit on trading c/d | xxx |
|
| Gross Profit on manufacturing b/d | xxxx | |
| Gross Profit on trading b/d | xxx | |
xxxxx |
NB:
- The last layout is more complicated but it shows the portion of gross profit that is attributable to manufacturing and the one attributable to the business’s trading activities.
- It is is unlikely you will encounter a question involving manufacturing profits as it will lead to a host of other issues that are beyond the scope of Ordinary level
To access more topics go to the Principles of Accounts Notes.
