The finished goods that we see in the market are prepared by the manufacturer before bringing them to the market and when the manufacturer produces the goods, he has to go through many processes for which he needs raw materials, labour, land, machinery, electricity, etc. Many things are required like this. When all these things come together a finished product is created. In business, all these things are recorded in the manufacturing account so that further processing can be done.
Manufacturing account is prepared to know about the cost of manufacturing as its concept helps in calculating the cost of manufacturing. In this, all the transactions related to manufacturing like raw material, labour, land, machinery, power, etc. are recorded. It is prepared by the same businesses that are involved in manufacturing but whether to prepare it or not depends on the business.
Table of Contents
Contents of Manufacturing Account
Following are the contents of manufacturing account:
Debit Side | Credit Side |
Opening Stock | Manufacturing Income |
Manufacturing Expenses | Closing Stock |
Cost of Manufacturing |
1. Opening Stock:
Opening stock means the remaining stock of the previous year. When stock is left over in a year it is shown as opening stock in the next year. The main purpose of showing this is to calculate the cost of manufacturing correctly. In the manufacturing account, opening stock is shown at the top on the debit side. In the manufacturing business there are mainly two types of opening stock, one is raw material, and the other is work in progress.
2. Manufacturing Expenses:
Manufacturing expenses means the expenses incurred due to manufacturing and it is very important for producing goods. It includes all the expenses incurred during the manufacturing process such as the purchase of raw materials, labour, land, power, inward carriage, etc. Manufacturing Account is a nominal account due to which all expenses are recorded on the debit side.
3. Manufacturing Income:
Manufacturing income means the income earned during the manufacturing process and it helps in calculating the true cost of manufacturing. Manufacturing income includes the sale of scrap, the sale of waste generated during the manufacturing process, etc. Manufacturing Account is a nominal account due to which all the income is recorded on the credit side.
4. Closing Stock:
Closing stock means the stock remaining at the end of the financial year and is shown on the credit side in the manufacturing account. The main objective of showing closing stock is to calculate the cost of manufacturing correctly. In the manufacturing business there are mainly two types of closing stock, one is raw material, and the other is work in progress.
5. Cost of Manufacturing:
The cost of manufacturing is also known as the cost of production and refers to the cost incurred in producing goods. In the manufacturing account, it is shown on the credit side. To calculate it, the credit side is subtracted from the debit side and the balance that is left is called the cost of manufacturing. The main objective of preparing a manufacturing account is to calculate the cost of manufacturing.
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QNA/FAQ
Q1. On which side is the cost of production written in manufacturing account?
Ans: On the credit side.
Q2. What does manufacturing income mean in manufacturing business?
Ans: Manufacturing income means income earned during the manufacturing process.
Q3. On which side is the opening stock written in the manufacturing account?
Ans: On the debit side.
Q4. On which side are manufacturing expenses written in the manufacturing account?
Ans: On the debit side.
Q5. On which side is closing stock written in the manufacturing account?
Ans: On the credit side.
Q6. Write the contents of the manufacturing account.
Ans: Following are the contents of manufacturing account:
Debit Side
1. Opening Stock
2. Manufacturing Expenses
Credit Side
1. Manufacturing Income
2. Closing Stock
3. Cost of Manufacturing