Manufacturing Accounting Chapter 26

Preparing a cost of goods manufacturing schedule. Learning Objective 1

Manufacturing Raw material Direct Labor Overhead Manufacturing Raw material Direct Labor Overhead Administrative Management Sales Personnel Administrative Management Sales Personnel Administrative Learning Unit 26-1 n Manufacturing costs must be separated from all other selling and administrative costs.

Learning Unit 26-1 n Direct Materials: n Beginning inventory +Net purchases –Ending inventory =Direct material cost n Work-in-Process Inventory: n Beginning inventory +Direct material cost +Direct labor +Manufacturing overhead =Total manufacturing costs –Ending inventory =Cost of goods manufactured

Raw materials used Raw materials used WIP Inventory WIP Inventory Finished Goods Inventory Finished Goods Inventory Manufacturing overhead Manufacturing overhead Direct labor Cost of goods sold Cost of goods sold Learning Unit 26-1

Beginning merchandise inventory + Net purchases = Cost of merchandise available for sale – Ending merchandise inventory = Cost of goods sold Merchandising Co. Learning Unit 26-1

Beginning finished goods inventory + Cost of goods manufactured = Cost of goods available for sale – Ending finished goods inventory = Cost of goods sold Manufacturing Co. Learning Unit 26-1

Journalizing transactions recording the manufacturing process. Learning Objective 2

Learning Unit 26-2 n Source documents provide proof of transactions. n Receiving reports acknowledge receipt of goods. n Material requisitions are requests for materials from storage areas.

Received from Adams Company Receiving Report #1031 Date Received: 6/20/0x Quantity Description Unit Price Total Price 50 Gals. Paint $6.50/Gallon $ Inspected By______________________ Received By______________________ Received from Adams Company Receiving Report #1031 Date Received: 6/20/0x Quantity Description Unit Price Total Price 50 Gals. Paint $6.50/Gallon $ Inspected By______________________ Received By______________________ Receiving Report

Materials Requisition Date: June 20, 200x Number: 3648 From: Finishing Department Quantity Description Unit Price Total Price 8Gal. White Paint $6.50/Gallon $52.00 Inspected By _______________________ Received By________________________ Materials Requisition Date: June 20, 200x Number: 3648 From: Finishing Department Quantity Description Unit Price Total Price 8Gal. White Paint $6.50/Gallon $52.00 Inspected By _______________________ Received By________________________ Materials Requisition

Learning Unit 26-2 n Clock cards list time worked for each employee for specific activities. n Lot tickets reflect movement of products through the manufacturing floor. n Labor distribution reports track the hours and dollars of labor to departments and products. n Bills of lading are shipping documents.

Learning Unit 26-2 n Flow charts illustrate the movement of the material, labor, and overhead through the operation. n They support journal entries. n Overhead – Control is debited as costs are incurred. n Overhead – Applied is credited when overhead is applied to products.

Debit Work-in-Process Inventory Credit Raw Material Inventory Debit Work-in-Process Inventory Credit Raw Material Inventory Debit Work-in-Process Inventory Credit Payroll Debit Work-in-Process Inventory Credit Payroll Debit Overhead – Control Credit Supplies Inventory Debit Overhead – Control Credit Supplies Inventory Learning Unit 26-2

Debit Overhead – Control Credit Payroll Debit Overhead – Control Credit Payroll Debit Overhead – Control Credit Supervision Salaries Rent Expense Depreciation Expense Electricity Expense Debit Overhead – Control Credit Supervision Salaries Rent Expense Depreciation Expense Electricity Expense Learning Unit 26-2

Debit Work-in-Process Inventory Credit Overhead – Applied Debit Work-in-Process Inventory Credit Overhead – Applied Debit Finished Goods Inventory Credit Work-in-Process Inventory Debit Finished Goods Inventory Credit Work-in-Process Inventory Debit Cost of Goods Sold Credit Finished Goods Inventory Debit Cost of Goods Sold Credit Finished Goods Inventory Learning Unit 26-2

Preparing a worksheet for a manufacturing company. Learning Objective 3

Learning Unit 26-3 n The worksheet for a manufacturing company is used to produce the following: – Statement of cost of goods manufactured – Income statement – Statement of retained earnings – Balance sheet

Statement of Retained Earnings Statement of Retained Earnings Balance Sheet Balance Sheet Cost of Trial Adjust. Goods Income Balance Balance Manufactured Statement Sheet Income Statement Income Statement Statement of Cost of Goods Manufactured Statement of Cost of Goods Manufactured Learning Unit 26-3

End of Chapter 26