Page 173 - DMGT104_FINANCIAL_ACCOUNTING

Particulars ( ) Particulars ( )
To Purchases 20,000 By sales 30,000
-Returns 200 19,800 -Returns 500 29,500
To Wages 1,200 By Closing stock 7,500
To Gross Profit c/d 16,000
Unit 8: Financial Statements
37,000 By Gross profit b/d 37,000
To Salaries 900 16,000
To Travelling Expenses 700
Notes
To Commission 300
To Telephone 100
To Net Profit 14,000
16,000 16,000

Cost of Raw Material consumed: If there is opening stock of raw materials in the business and
purchases are made of raw materials during the year and some stock is left at the end, then the
cost of raw materials consumed is to be calculated as follows:

( )
Opening stock of Raw Materials -
+ Purchases made -
– Returns during the period -
– Closing stock of Raw Materials -
Cost of raw-materials consumed

Task Calculate the cost of materials consumed from the following:
Opening Stock ( )
Raw materials 4,500
Work in Progress 12,000

Finished Goods 14,800
Sales 50,000
Purchases during the year 24,500
Carriage inwards 500
Closing stock—raw materials 1,500
Work in Progress 4,800
Finished Goods 2,700

Hint: 28000
8.5.4 Manufacturing Account

If in the business some goods are being manufactured along with the trading activities, a
manufacturing account is also prepared. In the case of trading activities (selling and purchasing
of goods) only, the Trading and Profit & Loss Account is prepared to compute the net profit
which is discussed in the preceding pages. In case there is a manufacturing unit in the business
with the trading, such a businessman’s income statement will include:
(i) Manufacturing Account
(ii) Trading Account
(iii) Profit & Loss Account

Manufacturing Account is prepared to know the results of manufacturing unit i.e. cost of
production.

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