1. Manufacturing Accounts
Al madrasathul munavvara

2. Manufacturing Business
Many business entities engage in manufacturing activities and this involves:
The purchasing of raw materials
Incurring labor
and other cost
in converting the raw materials into finished goods.

3. Manufacturing Business
In order to ascertain the cost of producing the goods a manufacturing account is prepared. This account is also normally prepared at the end of the accounting period. Both direct and indirect expenses associated with the manufacturing process debited to the manufacturing account. The balance of this account representing cost of the goods produced is then transferred to the trading account.

4. (a)Manufacturing Business
The order of presentation of the final accounts is as under: (a) Manufacturing Account Part (b) Income Statement (Trading AC Part) (c) Income Statement (Profit and Loss AC Part) (d) Balance Sheet Part.

5. Division of Costs
Direct Materials Direct Labour Direct Expenses Plus Factory Overhead Administrative Expenses Selling & Distribution Expenses Financial Charges
Prime
Cost
Production
Cost
Total Cost

6. Production Cost
Prime Cost xxxxx Add: Factory Overhead xxxxx Production cost xxxxx (Production Cost = Prime cost (Direct Cost)+ Factory overhead expenses (Indirect cost)

7. Prime Cost Direct Material xxxxx Add: Direct Labour xxxxx
Direct Expenses xxxxx
Prime Cost xxxxx
(Prime Cost = Direct Material+ Direct Labour + Direct Expenses)

8. 1. Direct materials Opening Inventory of Raw Materials xxxxx
Costs of the materials used during the period.
Include Opening Inventory of Raw Materials
+ Purchase price of the raw materials and the acquisition costs related to the purchase.
- Closing Inventory of Raw Materials
Examples:
Opening Inventory of Raw Materials xxxxx
Add: Purchase of raw materials xxxxx
Carriage inwards / freight charges xxxxx
Available for use xxxxx
Less: Closing Inventory of Raw Materials (xxxx)
Direct Material used xxxxx

9. 2. Direct labour 3. Direct Expenses
Wages paid to the people who are directly involved in the manufacturing process.
Example: Direct labour, Direct wages, Factory wages, Production wages, Manufacturing wages
Wages of a machine operator making a particular item
3. Direct Expenses
They refer to the expenses paid according to each unit of production.
Examples: Royalties

10. Prime Cost
Direct Material xxxxx Add: Direct Labour xxxxx Direct Expenses xxxxx Prime Cost xxxxx

11. Factory Overhead (Indirect Manufacturing Costs)
Factory Overhead or Indirect Manufacturing Costs are all those costs which occur in the factory or other place where production is being done, but which cannot be traced to the items being manufactured.
Example:
Wages of Cleaner
Wages of Crane operator
Wages of Supervisors
Rent and Rates of Factory
Depreciation of Plant and Machinery
Factory Power
Factory Lighting

12. Factory Overhead (Indirect Manufacturing Costs)
Factory Overhead or Indirect Manufacturing Costs are all those costs which occur in the factory or other place where production is being done, but which cannot be traced to the items being manufactured.

13. Production Cost Direct Materials Direct Labour Prime Direct Expenses
Plus
Factory Overhead
Prime
Cost
Production
Cost

14. Work in Process
It refers to the semi-finished goods, which should be included in the cost of goods manufactured.
The opening inventory of the Work In Process should be added
And
The closing inventory of the Work In Process should be subtracted
Direct Materials
Direct Labour
Direct Expenses
Plus
Factory Overhead
Plus Work in Process (opening)
Less Work in Process (Closing)
Prime
Cost
Production
Cost
Total Cost of Goods Manufactured

15. (a) Manufacturing Account

16. (b) Income Statement This includes:
Production cost brought down from Manufacturing Account
Opening and Closing Stock of Finished Goods
Sales

17. (c) Income Statement This includes:
Gross Profit brought down from Trading Account
All administrative expenses
All selling and distribution Expenses
All Financial Charges

18. (d) Balance Sheet This includes: All Assets (Current & non-current)
All Liabilities (Current & non-current)
All Capital & Drawing and Net Profit or Loss

19. (d) Balance Sheet

20. Thank You Al madrasathul munavvara Ali naseer abdul raheem