MANUFACTURING ACCOUNTS

define manufacturing business.

it is a business that produces goods.

• what does a manufacturing account show?

• a manufacturing account shows the costs of running and maintaining the factory in which a final product is made.

• a manufacturing account shows the costs of running and maintaining the factory in which a final product is made.

• raw-materials, WIP, finished goods

• how is prime cost calculated?

• PRIME COST = RAW MATERIAL+ DIRECT LABOUR + DIRECT EXPENSES

• how is cost of production calculated?

• COP = PRIME COST + FACTORY OVERHEADS + OPENING WIP - CLOSING WIP

• how is transfer price calculated?

• T.P = COP + FACTORY PROFIT

• why is provision for unrealised profit created?

• unrealised profit should not be anticipated and the profit should be removed from the inventory by creating a provision for unrealised profit according to IAS 2 -inventories and the prudence concept.

• what is the double entry for:

  increase in U.P

  decrease in U.P?

• increase: DR INC.STMT, CR PFUP

  decrease: DR PFUP, CR INC. STMT