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Manufacturing Account

April 27, 2019 by admin Leave a Comment

MANUFACTURING ACCOUNT 

In the preceding pages, we have explained the preparation of the Trading and Profit and Loss Account from the point of view of a trader, i.e., a person who purchases and sells goods. However, a person may manufacture goods by himself for selling them at a profit. In case of such a person, i.e., a manufacturer, it will be necessary to ascertain the cost of manufacturing the goods. In his case, therefore, the profit or loss made by him will be ascertained by preparing the following three accounts:

(i) Manufacturing account This account gives the cost of the goods manufactured by a manufacturer during a particular period.

(ii) Trading account This account gives information about the gross profit or loss made by a manufacturer in selling the manufactured goods. In case a manufacturer also functions as a trader, i.e., besides manufacturing and selling goods of his own, he also purchases arid sells goods of others, he will be a manufacturer-curn-tracler. In such a case, his Trading Account will disclose not only the profit made by him on selling his manufactured goods, but also the profit made by him in selling the goods purchased by him from others.

(iii) Profit and loss account This account gives the overall profit or loss made or suffered by the manufacturer of manufacturer—cum—trader during a particular period.

Filed Under: Accounting Tagged With: Manufacturing Account, Profit and loss account, Trading Account

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