Manufacturing Account

In case of manufacturing or construction company, we make manufacturing account before making trading account because with this account we can calculate the cost of production. In simple words, manufacturing account shows net cost of production after adjusting opening stock of raw material and purchase of it with closing stock of raw material.  It is known as production account. We show opening stock of raw material and work in progress, purchase of raw material and expenses relating to production in the debit side of manufacturing account. In the credit side we show sale of scrap and closing stock of raw material and work in progress. Difference of debit and credit will be cost of production which will be shown in the credit side of manufacturing account and will be transferred to the debit side of trading account.

Manufacturing account is made on the basis of following formula

Opening stock of raw material ---------XXXX

Add purchase of raw material ----------XXXX

-------------------------------------------------
   -------------------------------------- XXXX

Less return of raw material --------------XXXX
-----------------------------------------------

------------------------------------- ---XXXX

Add Opening stock of
work in progress -----------------------XXXX

Add Direct Expenses on production --- XXXX

_____________________________________

---------------------------------------- XXXX

Less closing stock of Raw material----- XXXX

Less closing stock of work in
progress ------------------------------XXXX

---------------------------------------------------

Cost of Production  -------------------XXXX

______________________________________