ZIMSEC O Level Principles of Accounting: Example question Manufacturing Accounts
- This is a solution to a Manufacturing Account question that was posted here
- The introduction to Manufacturing Accounts and concepts related to the topic can be found here
- We explored the nature and format of Manufacturing Accounts here
- We will start by showing the Manufacturing Account
- Then the Income Statement ( Trading and Profit and Loss Account)
- Finally we will show the Statement of Financial Position
E Makonese
Manufacturing Account for the year ended 31 December 20×8
| $ | $ | |
| Opening stock of raw materials | 13 260 | |
| Add Purchases | 57 210 |
|
| 70 470 | ||
| Less Closing Stock of raw materials | (14 510) |
|
| 55 960 | ||
| Manufacturing Wages | 72 650 |
|
| Prime Cost | 128 610 | |
| Add Overheads | ||
| Factory lighting and heating | 7 220 | |
| General Expenses: Factory | 8 100 | |
| Factory Rent | 6 100 | |
| Machinery depreciation | 3 000 | |
| 24 420 | ||
| Production cost of completed goods(A) | 153 030 |
NB:
- The total factory wages are obtained by adding the accrued wages of $550 to $72 100
E Makonese
Income statement for the year ended 31 December 20×8
| $ | $ | |
| Sales | 194 800 | |
| Less Cost of Sales | ||
| Opening stock of finished goods | 41 300 | |
| Add Production cost of completed goods (A) | 153 030 | |
| 194 330 | ||
| Less closing stock of finished goods | 44 490 | |
149 840 |
||
| Gross Profit | 44 960 | |
| Less Expenses | ||
| Office salaries | 17 740 | |
| Office General Expenses | 1 940 | |
| Office Rentals | 2 560 | |
| Office heating and ligting | 1 490 | |
| Sales rep's commission | 11 688 | |
| Delivery van expenses | 1 760 | |
| Office equipment Depriciation | 600 | |
| Delivery Van depreciation | 1200 | |
| 38 978 | ||
38 978 |
NB:
- Prepaid Office rent of $140 has to be excluded from the current year’s calculations
- Delivery van is not part of the production department hence its depreciation is not included in the manufacturing account. In cases where the van is used to ferry raw materials as well the depreciation expense would have to be apportioned according to usage or any other rational that management might deem appropriate.
E Makonese
Statement of Financial Position as at 31 December 20×8
| $ | $ | $ | |
| Non-Current Assets | Cost | Depreciation | Net Book Value (NBV) |
| Machinery | 40 000 | 14 400 | 25 600 |
| Office Equipment | 9 000 | 1 400 | 7 600 |
| Delivery Van | 6 800 | 1 800 | 5 000 |
| 55 800 | 17 600 | 38 200 | |
| Current Assets | |||
| Inventories: Finished Goods | 44 490 | ||
| Raw Materials | 14 510 | ||
| Debtors | 34 200 | ||
| Prepaid Expenses (Rent) | 140 | ||
| Bank | 116 | ||
| 109 482 | |||
| Less Current Liabilities | |||
| Creditors | 9 400 | ||
| Accrued Expenses( Wages) | 550 | ||
(9 950) | |||
| 99 532 | |||
137 |
|||
| Financed By: | |||
| Capital | 155 950 | ||
| Add Net Profit | 5 982 | ||
| Less Drawings | (24 200) |
||
137 |
NB:
- All inventory balances are shown under Current Assets in the Statement of Financial Position.
- If we had them we would have shown Work In Progress Inventories here as well
To access more topics go to the Principles of Accounts Notes.
