Manufacture accounting
Manufacturing accounting means accounting relating to production or manufacturing. All accounting can divide also manufacturing and non manufacturing.
Accounting up to converting raw material to finished product includes in manufacturing accounting. We specially open manufacturer account for recording all items regarding production. In manufacture account we record direct material cost, labor cost and production overhead cost. Manufacture account is helpful to find out the value of cost of production which transfers to trading account. It is also part of financial statement.
Manufacturing account starts opening balance of raw material in its debit side.
Amount of purchase of raw material are also debited in this account and direct labour charges and other manufacturing overheads like, depreciation of plant, lighting of plant and factories other expenses will transfer to debit side of manufacturing account. In the credit side of manufacturing account we shows closing balance of raw material and work in progress and scrap sale. The difference of both sides is the cost of production which transfers to trading account’s debit side.
Manufacturing account is also helpful for finding the value of gross profit because gross profit is difference between cost of sale and sale value but cost of sale can not be calculated without finding the value of cost of production .So, factory accountant records every transaction relating to factory and one these voucher entry basis we find manufacture or manufacturing account
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