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Manufacturing Account

It is prepared to ascertain the cost of goods manufactured during an accounting period.

This account is prepared only by a business which is manufacturing goods.

Items appearing on the debit side


It is of three types:

  • Raw materials: raw material purchased but not yet consumed.
  • Work in progress: Goods which are still semi-finished.
  • Finished goods: Completed goods but yet unsold and laying in warehouse waiting to be sold.

Raw materials consumed during the period is calculated as follows

Opening Stock of Raw material


Add: Purchase of Raw Materials




Less: Closing Stock of Raw Materials




Carriage Inwards

All expenses incurred for bringing the raw materials to the factory e.g. custom duty, excise etc.

Factory overheads

All indirect expenses related to the operation of factory such as

  • indirect materials (not direct raw material used in manufacturing) e.g. lubricants for machinery
  • indirect labour (not direct labour) e.g. supervisor wages
  • indirect expenses such as factory insurance, rent, depreciation of machinery

Items appearing on Credit Side

Sale of Scrap

Scrap is the waste products during the process of manufacturing. Money realized by their sales (an income!)

Any Work in Progress

Any unfinished goods left with the manufacturer at the end of the accounting period.


How to calculate the Cost of Production?

Total Debit Side – Total Credit Side

This balance is known as the Cost of Production

It is transferred to the Trading Account.


Format of Manufacturing Account


download Manufacturing Account Format adobe_reader45x45




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