Accounts Management module in T24, Release 12Full description
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HUGE NETFLIX PREMIUM ACCOUNTS DUM [16,000]+ ACCOUNTS!Full description
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MANUFACTURING ACCOUNTS
For manufacturing organizations, manufacturing accounts will be needed in addition to a trading and profit and loss accounts. This will be for internal purposes/ use in the company. In place of purchases we will instead have the cost of manufacturing the goods.
For a manufacturing business the manufacturing costs are divided into the following types: i)
Direct material costs
Direct material costs are those materials used directly in the manufacture of products i.e. materials that can be identified in the final products. p roducts. .g. in the manufacture of tables, direct materials consists of timber, nails, glue etc. ii)
Direct labour costs
These are wages paid to those who are directly involved in the manufacture of a product e.g. in the manufacture of tables! direct labour consists of wage paid to those wor"ers who saw, shape of #oin the piece of timber into table. iii)
Direct expenses
These are e$penses that must be incurred in the manufacture of a product. That is, they can be directly allocated a particular unit of a product e.g. live charges for a special e%uipment used in the process of manufacture, royalties &': The sum of all the direct costs is "nown as prime costs iv) iv)
Ini Inire rect ct manu manu!a !act ctur urin in" " cos costs ts # !ac !acto tor$ r$ over over%e %ea ass
These are any other e$penses e$ penses (apart from the direct costs) for items being manufactured: .g. cleaners* wages, factory rents, depreciation of plant and e%uipment, factory power and lighting N&' prime cost ( inirect manu!acturin" costs *RODUCTION COSTS
v)
Aministrative +x +xpenses
These are e$penses that are administrative in nature, that is, e$penses incurred in the process of panning, controlling and directing the organization. e.g. office rents, office electricity, depreciation of office machinery, secretarial salaries.
+
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vi)
Sel Sellin" in" an an is istri tributi ution ex expens enses
These are e$penses incurred in the process of selling, promoting and distributing the goods manufactured. .g. advertising adve rtising e$penses, carriage outwards, depreciation of motor van, salesmen salaries etc. vii)
Finance Costs
These are e$penses such as ban" charges, discount allowed. Format o! t%e !inancial statements Manu!acturin" account part
This is debited with the production cost of goods completed during the accounting period: It consists of: Direct materials Direct labour Direct e$penses Indirect manufacturing costs. It also includes ad#ustments for wor" in progress (goods that are part completed at the end of a period). ST+*S
+. -dd opening opening stoc" of raw raw materials materials to to purchases purchases and subtract subtract the the stoc" of raw raw materials. This is to get the cost of materials used during the period. . -dd in in all the the direc directt costs costs to to get the the prime prime cost costss . -dd all all the the indire indirect ct manufa manufactu cturin ring g costs. costs. 0. -dd the opening opening stoc" of of 1I2 and and subtract subtract the the closing closing stoc" stoc" 1I2 1I2 to get the the production cost of all goods completed in the period. This is because 1I2 cannot be sold and therefore should not be included in the trading account. 3. The manufactur manufacturing ing account account when completed completed shows shows the total total that that is availabl availablee for sale during the period. This will be used in trading account in place for purchases. Final accounts o! a manu!acturer
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Treatments o! loose materials
The cost of loose tools consumed during the year is considered as a factory overhead in the manufacturing account and is determined as follows: 7pening stoc" of loose tools
$$
-dd purchases of loose tools
$$ $$
8ess closing stoc" of loose tools 9ost of loose tools consumed consumed
($$) $$
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Manu!acturin" Accounts Formats Manu!acturin" Account !or t%e ,ear ene -. December xx
shs toc" of raw materials +.+.; $ <
$$
-dd purchases of raw materials
$$
9arriage inwards of raw materials
$$
shs
$$
8ess closing stoc" of raw materials
($$)
9ost of raw materials consumed
$$
-dd: Direct 1ages
$$
Direct $penses
$$
2rime 9osts
$$
Indirect 4anufacturing costs Factory lighting
$$
Factory =ent
$$
Depreciation of Factory 4achinery
$$
Indirect labour
$$
Indirect 4aterials
$$
9ost of loose tools consumed
$$ $$ $$
-dd wor" in 2rogress +.+.;$<
$$
$$ 8ess wor" in 2rogress +.+.;$< 2roduction costs of goods completed c/d
($$) $$
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8ess cost of goods sold -dd production cost of goods completed b/d
$$ $$
8ess closing stoc" of finished goods
($$)
9ost of ales
( $$)
>ross 2rofit
$$
8ess $penses 7ffice =ent
$$
7ffice lectricity
$$
Depreciation of 7ffice 4achinery
$$
elling ? distribution e$penses
$$
-dvertising
$$
Delivery @an e$penses
$$
-dvertising
$$
Delivery @an e$penses
$$
9arriage 7utwards
$$
alesmen salaries
$$
($$) &et 2rofit / (8oss) Note' +xpenses s%oul be appointe as !ollo3s'
Indirect manufacturing costs 5 9harged in manufacturing account -dministrative e$penses
$$ / ($$)
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Treatment o! manu!acturin" *ro!it1
4anufacturing profit occur where goods manufactured are transferred from factory to the warehouse at a higher value more than the cost of production i.e the mar"et value. The difference between the mar"et value and the cost of production is the manufacturing profit. 4anufacturing profit should be added to the cost of production in the manufacturing account so as to arrive at the mar"et value of goods manufactured. The mar"et value of goods manufactured should ta"e the place of purchases in the trading account. The double entry for the manufacturing profit is: DR 4anufacturing 4anufacturing -ccount
2rofit and loss account. CR 2rofit
Treatment o! unreali4e *ro!it
6nrealized 2rofit occurs where it is the policy of the firm to value stoc"s of finished goods at mar"et value rather than at cost. The difference between the mar"et value and the cost of the finished goods is the unrealized profit. The difference between the unrealized profit on the opening stoc" of finished goods and the unrealized profit on the closing stoc" of finished goods should be charged to the profit and loss account. The provision for unrealized profit on the closing stoc" by the end of year should be subtracted from the mar"et value of the finished goods in the balance sheet. (i.e closing stoc" is stated at production cost on the balance sheet)