Page 174 - DMGT104_FINANCIAL_ACCOUNTING

Financial Accounting

Notes It includes:
[Debit side]
1. Carriage inwards paid on the purchase of raw materials is to be shown on the debit side of
Manufacturing account.
2. Manufacturing wages and other direct expenses - are also shown on the debit side of
manufacturing account.

Prime Cost = Cost of Direct Manufacturing + Wages + Direct expenses.
3. Factory Expenses: All expenses of the factory such as wages, power and fuel, rent and rates,
factory lighting, depreciation on machinery, salaries of manager and factory workers,
repairs etc. is debited to this account.
4. Work in Progress: Whenever manufacturing is done, it always happens that some of the
articles are not OK for sale, hence these are termed as Work in Progress. If such stock is there
at the beginning, then it is added with the factory cost whereas if such stock is there at the end
it is deducted from factory cost. Work in progress is also termed as semi-finished goods.
[Credit side]
(i) Closing stock of Raw Materials if not shown along with cost of raw materials
consumed.
(ii) Closing stock of work in progress/Semi-finished goods. Difference of credit and
debit side of the manufacturing account is transferred to trading account.

(iii) Sale of scarp, if any.
This account is prepared before the trading account. The balance of this account is transferred to
Trading Account. The proforma of Manufacturing Account is given hereunder:

Pro forma of Manufacturing Account
Manufacturing Account
(for the year ending ………)
Particulars ( ) Particulars ( )
To Opening Stock By Closing Stock
Raw Materials -------- Raw Materials ------
Work-in-progress -------- ---- Work-in-progress ------ ----
To Purchase of materials ----- By Sale of Scrape ----
Less returns ----- ---- By Cost of Production (Transferred ----
To Manufacturing Wages ---- to Trading A/c)
To Carriage Inwards ----
To Factory Expenses ----
To Stores Consumed ----
To Factory Rent ----
To Electricity ----
To Depreciation on Plant ----
To Repairs of Plant ----
To Works Manager’s Salary ----
To Coal and Fuel ----
To Other Factory exps. ----
---- ----

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