Accounting for Manufacturing Activities Chapter 28 Accounting for Manufacturing Activities Section 2: Completing the Accounting Cycle Section Objectives In section 2 of chapter 28, we will complete the accounting cycle for a manufacturer-- Prepare a worksheet for a manufacturing business. Record the end-of-period adjusting entries for a manufacturing business. Record closing entries for a manufacturing business. Record reversing entries for a manufacturing business.

Objective 5. Prepare A Worksheet For A Manufacturing Business. The fifth objective of this chapter is to prepare a worksheet for a manufacturing business.

The Accounting Cycle for a Manufacturing Business The steps in the accounting cycle do not change for a manufacturing business. The worksheet must be constructed to facilitate preparation of the cost of goods manufactured statement. The worksheet has two new columns: Cost of Goods Manufactured Debit column Cost of Goods Manufactured Credit column The steps in the accounting cycle do not change for a manufacturing business. However, in the worksheet, two new columns are added. We add a cost of goods manufactured debt and credit column.

The worksheet of a manufacturing business contains several new accounts: Raw Materials Inventory Work in Process Inventory Finished Goods Inventory Direct Labor Various Manufacturing Overhead Accounts Manufacturing Summary The worksheet of a manufacturing business contains several new accounts. Those new accounts include: Raw materials inventory Work in process inventory Finished goods inventory Direct labor Various manufacturing overhead accounts; and Manufacturing summary

It is similar to the Income Summary account. QUESTION: What is the Manufacturing Summary account? The Manufacturing Summary account is the account to which all items on the statement of cost of goods manufactured are closed. ANSWER: What is the manufacturing summary account? The manufacturing summary account is the account to which all items on the statement of cost of goods manufactured are close. It is very similar to the income summary account used in sole proprietorship accounting. It is similar to the Income Summary account.

Adjusting Inventory Accounts Raw Materials Work in Process Finished Goods DR Manufacturing Summary CR Raw Materials Inventory for beginning inventory amount DR Manufacturing Summary CR Work in Process Inventory for beginning inventory amount 5. DR Income Summary CR Finished Goods Inventory for beginning inventory amount DR Raw Materials Inventory CR Manufacturing Summary for ending inventory amount DR Work in Process Inventory CR Manufacturing Summary for ending inventory amount 6. DR Finished Goods Inventory CR Income Summary for ending inventory amount In this slide, we examine the various adjusting journal entries made for the raw materials, work in process and finished goods inventory accounts for both beginning and ending inventory.

Adjusting Entries on the Worksheet Inventory Uncollectible accounts Expired insurance Supplies on hand Depreciation Accrued salaries Payroll taxes on accrued payroll Income tax payable As with sole proprietorship accounting, we also make adjusting journal entries on the manufacturing worksheet for: Uncollectible accounts Expired insurance Supplies on hand Depreciation Accrued salaries Payroll taxes, and Income taxes

Preparing Financial Statements From the Worksheet Three sets of columns exist for the financial statements: Cost of Goods Manufactured Balance Sheet Income Statement When preparing the financial statement for a manufacturing business from a worksheet, we use three sets of columns. Those columns are the Cost of Goods Manufactured, the Balance Sheet and the Income Statement.

Objective 6. Record The End-of-period Adjusting Entries For A Manufacturing Business. The sixth objective of this chapter is to record the end-of-period adjusting entries for a manufacturing business.

Adjusting Entries for a Manufacturing Business 2007 Dec. 31 Manufacturing Summary 27,000.00 Raw Materials Inventory 27,000.00 (Adjustment a) Raw Materials Inventory 24,500.00 Manufacturing Summary 24,500.00 (Adjustment b) Manufacturing Summary 11,900.00 Work in Process Inventory 11,900.00 (Adjustment c) Work in Process Inventory 11,500.00 Manufacturing Summary 11,500.00 (Adjustment d) Income Summary 32,500.00 Finished Goods Inventory 32,500.00 (Adjustment e) Finished Goods Inventory 29,000.00 Income Summary 29,000.00 (Adjustment f) 31 In this slide we make the adjusting entries for raw materials, work in process, and finished goods inventory for a manufacturing business. Notice the inventory accounts are credited for the beginning inventory, and credited for the ending inventory. Inventory accounts are credited for beginning inventory and debited for ending inventory.

Adjusting Entries for a Manufacturing Business Record uncollectible accounts expense 2007 Dec. 31 Administrative Expense (Control) 1,240.00 Allowance for Doubtful Accounts 1,240.00 (Adjustment g) Insurance—Factory 3,900.00 Administrative Expense (Control) 100.00 (Adjustment h) Supplies on Hand 800.00 Indirect Materials and Supplies 800.00 (Adjustment i) Depreciation—Factory Building 7,500.00 Depreciation—Factory Equipment 5,000.00 (Adjustment j) Administrative Expense (Control) 1,000.00 Accumulated Depr.—Factory Building 7,500.00 31 Prepaid Insurance 4,000.00 Accumulated Depr.—Factory Equipment 5,000.00 Accumulated Depr.—Office Equipment 1,000.00 Record expired insurance amount Record supplies on hand In this slide, entries are shown to record uncollectible accounts expense, expired insurance, supplies expense and depreciation. These entries are similar to what are recorded in sole proprietorship accounting. Record depreciation expense

Adjusting Entries for a Manufacturing Business 2007 Dec. 31 Direct Labor 3,000.00 Salaries and Wages Payable 3,500.00 (Adjustment k) Payroll Taxes—Factory 257.75 Social Security Tax Payable 217.00 (Adjustment l) Income Tax Expense 2,025.00 Income Tax Payable 2,025.00 (Adjustment m) 31 Indirect Labor 500.00 Medicare Tax Payable 50.75 Record accrued wages Record payroll taxes on accrued wages In this slide adjusting journal entries are made for accrued wages, payroll taxes on accrued wages, and estimated income tax expense. Record estimated income tax

Objective 7. Record Closing Entries For A Manufacturing Business. The seventh objective of this chapter is to record closing entries for a manufacturing business.

Closing Entries Close accounts to Manufacturing Summary. Close revenue and expense accounts to Income Summary. Close Manufacturing Summary to Income Summary. Close Income Summary to Retained Earnings. There are four closing entries need for a manufacturing business. First, accounts are closed to the manufacturing summary. Second, revenue and expense accounts are closed to income summary. Third, the manufacturing summary account is closed to income summary. Finally, the income summary is closed to retained earnings.

Objective 8. Record Reversing Entries For A Manufacturing Business. The eight objective of this chapter is to record reversing entries for a manufacturing business.

Reversing Entries Reversing entries may be made for adjustments for accruals. Reversing entries are also made for expenditures which were initially debited to expense accounts. Reversing entries are optional. Reversing entries for a manufacturing business are very similar to sole proprietorship accounting. First, reversing entries are optional. Second, reversing entries may be made of accruals and for expenditures which were initially debited to an expense account.

SECTION R E V I W Complete the following sentences: The worksheet for a manufacturing business contains Debit and Credit columns for _________________________. Cost of Goods Manufactured All the accounts that appear on the statement of cost of goods manufactured are closed to the _____________________ account. Manufacturing Summary Let’s review; When adjusting the finished goods inventory, debit Finished Goods Inventory and credit _______________ for the ending inventory amount. Income Summary

Complete the following sentences: Cost of Goods Manufactured V I W SECTION Complete the following sentences: The worksheet for a manufacturing business contains _____ sets of columns for financial statements. three The Manufacturing Summary account is closed to the _______________ account. Income Summary On the worksheet for a manufacturing business, the inventory accounts appear in the _________________________ section. Cost of Goods Manufactured

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