MANUFACTURING ACCOUNT :
A manufacturing concern may like to ascertain the cost of goods during the accounting period and may prepare Manufacturing Account for this purpose. Trading Account is not capable of showing the cost of goods manufactured because it deals with stock of finished goods also and because some of the expenses connected with manufacture of goods (such as depreciation and repairs of machinery and factory) are debited to the Profit and Loss Account. Manufacturing Account is debited with all expenses incurred in the factory on production of goods. This means that depreciation and repairs to plant and machinery and factory building, salary to works manager, etc. are also debited to this account. The total of such expenses plus cost of raw material used gives cost of goods manufactured during the period. This is transferred to Trading Account which deals with stock of finished goods and sales also. The remaining nominal accounts appear in Profit and Loss Account.
In fact, there is no prescribed format for the presentation of Manufacturing Account. However, a format covering various elements is given below. The Trading Account and Profit and Loss Account should be prepared in the same way as discussed earlier.
SPECIMEN OF MANUFACTURING ACCOUNT
Manufacturing Account for the year ended……
Dr. Cr.
| Particulars | Rs. | Particulars | Rs. |
| To Work in progress (opening) | XXX | By Work in progress (closing) | XXX |
| To Raw material consumed: | By Sale of scrap | XXX | |
| Opening stock | XXX | By Cost of production of finished goods transferred to Trading Account | XXX |
| Add: Purchases | XXX | ||
| Less: Closing stock | XXX | ||
| To Direct wages | XXX | ||
| To Direct expenses | XXX | ||
| To Factory expenses: | |||
| Factory rent | XXX | ||
| Plant repairs | XXX | ||
| Indirect wages | XXX | ||
| Depreciation on factory | XXX | ||
| building | ____ | ||
| XXX | XXX |