Manufacturing Account

For a business that is engaged in manufacturing as well as distributing, a further division of expenditure is sometimes made so that all the costs of materials, direct manufacturing wages and other expenditure directly connected with the manufacture are marshalled in a Manufacturing Account, the balance representing the cost of actual manufacture being carried down to a Trading Account or, if no retail sales are made, directly to the Profit and Loss Account. Unless a business engages in both manufacture and trading in a big way, there may be no need for both Manufacturing and Trading Account.


The following balances were extracted from the websites of Andrew Shelton, a toy manufacturer, at the close of his year, 31 December 1979:

Trial Balance

Debits Credits

£1 £

Capital account 90,000

Drawings Account 7,000

Purchases T 47,970

Sales T T 148,020

Commencing stock T 11,460

Salaries P 6,280

Manufacturing wages T 38,560

Leasehold factory 25,000

Rent, rates and insurance P 6,940

Office expenses P 9,520

Plant and machinery 24,000

Provision for bad debts

as at 1 Jan. 79 3,240

Factory fuel consumed T 7,950

Sundry debtors 40,210

Sundry creditors 16,980

Carried over 224,890 258,240


Brought forward 224,890 258,240

Cash at bank 17,770

Cash in hand 2,210

Office furniture 3,500

Salesmen's wages

and commission P 9,870

258,240 258,240

Trading Account

The debit or left-hand side of the Trading Account will contain:

(a) commencing stock;

(b) purchase of goods or materials;

(c) wages and any other expenditure deemed to be directly connected with the creation of the sales.

On the credit side will be placed the total sales for the period, and the value of the closing stock. Total debits should come to less than total credits, and the differences represents gross profit on trading.

This amount will be entered as the final item on the debit side to cause the two sides to balance, and will... see: Trading Account

Refunds, Personal And Business Finance 2017

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