Manufacturing account of manufacturing businesses Layout
$ $
Raw materials inventory 1 January 2020 xx
Purchases of raw materials xx
Carriage on raw materials xx
Returns outwards of raw materials (xx)
xx
Raw materials inventory 31 December 2020 xx
Cost of raw materials consumed xx
Factory wages/Production wages/Manufacturing wages xx
Direct expenses/Direct factory expenses xx
Royalties xx
Direct materials xx
Prime cost xx
Factory overheads:
Factory indirect labour xx
Factory insurance xx
Indirect materials/Indirect packaging xx
Indirect factory expenses/Indirect expenses xx
Factory heating and lighting/Power/Electricity xx
Building maintenance xx
Factory management salaries xx
Factory rent xx
Depreciation-machinery xx
xx
Work in progress
At 1 January 2020 xx
At 31 December 2020 (xx)
xx
Cost of production xx
Income Statement of a manufacturing business Layout
$ $
Revenue xx
Returns inwards (xx)
xx
Inventory of finished goods 1 January 2020 xx
Cost of production xx
Purchases of finished goods xx
Returns outwards (xx)
xx
Inventory of finished goods 31 December 2020 (xx)
Cost of sales (xx)
Gross profit xx
Other incomes:
Rent receivable xx
Commission receivable xx
Decrease in provision for doubtful debts xx
xx
Less Expenses:
Wages and salaries xx
Insurance xx
Advertising xx
Bank interest xx
Electricity and water xx
Commission payable xx
Carriage outwards xx
Buildings maintenance xx
Interest on loan xx
Rent and rates xx
Discount allowed xx
Heat and light xx
Marketing expenses xx
Motor expenses xx
Irrecoverable debts xx
Increase in provision for doubtful debts xx
General expenses xx
Provisions for depreciation xx
Land and buildings/Premises xx
Office equipment xx
Motor vehicles xx
Fixtures and fittings xx
(xx)
Profit for the year xx
Notes
-Opening inventory is taken from the Trial balance/List of balances.
-Closing inventory is taken from additional information.
-If the owner took goods for personal/private use, subtract the amount taken before subtracting
closing inventory and add it to drawings in the statement of financial position as additional
drawings.
-Prepaid is subtracted from an expense/income.
-Due/owing/outstanding/Accrued is added to the expense/income.
-Rent and commission having credit balances or being credited are recorded under gross profit
as other incomes
-If no entry had been made in the books, make the double entry.
Calculation of Increase/ Decrease in provision for doubtful debts
%
Step1 x (Trade Receivables-irrecoverable debts in the additional information)=$xx
100
Step 2 $xx- Provision for doubtful debts= Increase in provision for doubtful debts
If the answer is negative= Decrease in provision for doubtful debts
Calculation of Depreciation per annum on cost/ using straight-line method
%
x At cost of that asset in the trial balance
100
Calculation of Depreciation using reducing balance method
%
x (At cost of the asset in the trial balance-Provision for depreciation of the asset in
100
the Trial Balance)
Calculation of Depreciation using revaluation method
Cost of the asset at the start of the year xxx
Add Cost of the asset bought during the year xxx
xxx
Less Cost of the asset sold during the year (xxx)
xxx
Annual Depreciation (Valuation amount-xxx) xxx
Valuation of the assets at the end of the year xxx
Statement of Financial Position of a manufacturing business Layout
$ $ $
Non-current assets Cost Accumulated Book
Depreciation value
Land and building/Premises xxx xx xx
Motor vehicles xxx xx xx
Fixtures and fittings xx xx xx
Machinery xx xx xx
Office equipment xxx xx xx
xxx xx xx
Current assets
Inventory Raw materials xx
Work in progress xx
Finished goods xx
xx
Trade receivables xx
Less provision for doubtful debts (xx)
xx
Other receivables xx
Bank xx
Cash xx
xx
Total assets xx
Financed by:
Capital xx
Profit for the year xx
xx
Drawings (xx)
xx
Non-current Liabilities
6% loan xx
Current liabilities
Trade payables xx
Bank overdraft xx
Other payables xx
xx
Total capital and Liabilities xx
Notes
-Accumulated depreciation amounts are calculated as depreciation recorded in the income
statement plus provision for depreciation given in the trial balance/list of balances. Do this
for each non-current asset.
-Inventory amounts are taken from additional information. They are closing inventories.
-Subtract irrecoverable debts before recording Trade receivables.
-Provision for doubtful debts is the provision for doubtful debts you calculated before
subtracting provision at the beginning of the year.
%
x (Trade Receivables-irrecoverable debts in the additional information)=$xx
100
-Other receivables amount is the total amount of all prepaid expenses and all due/owing/
outstanding incomes.
-Cash and cash equivalents amount is the combined amounts for bank and cash.
-Bank overdraft is the bank with a credit balance.
-Other payables figure is the total amount of all owed/outstanding/due expenses and prepaid
incomes.
Direct cost
-is a cost/expense which can be directly linked to the product being manufactured e.g raw
materials, factory wages and royalties.
Work in progress
-are items of production which are partial completed.
Reasons why a business purchases finished goods
-It is cheaper to produce than to buy.
-Demand is higher than production at full capacity.
