Manufacturing Account – Meaning, Rules And Format

Manufacturing Account – Those business organisations prepare manufacturing account where finished goods are manufactured from raw material. Manufacturing account is prepared to ascertain the cost of production of finished goods. Cost of production ascertained from manufacturing account, is transferred to trading account. Hence, a manufacturing concern prepares manufacturing account, profit and loss account and balance sheet for preparing its final accounts. In manufacturing account, cost of raw material and expenses incurred for converting it to finished goods are debited. The description of items to be shown in manufacturing account is as under:

Manufacturing Account Format

for the year ended ….

Particulars	Amount	Particulars	Amount
To Opening Work-in-Progress		By Sale of Scrap
To Cost of Raw Material Consumed		By Work in Progress
Opening Stock Add: Purchases of Raw		By Cost of Production i.e.(balancing figure transferred to trading A/c)
Material Add: Carriage Less: Closing Stock
To Factory Rent
To Factory Lighting
To Depreciation on Plant & Machinery
To Repair to Plant & Machinery
To Sundry (Factory) Expenses

Points To remember

In the absence of ledger balances like Inventories, quantity manufactured etc, we need to calculate the figures for Inventories, sales etc. from the available data.
The Manufacturing Account format must show the quantities and values.
Units sold = Opening inventory + units manufactured- closing inventory
In the absence of specific information, we always assume “first in-first out” basis, for closing inventory valuation.

Must Read – Golden rules of accounting

Must Read – Types of accounts

Must Read – Cost sheet format

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