Manufacturing Accounts

These flashcards cover key vocabulary and concepts related to manufacturing accounts, costs, and financial reporting.

Manufacturing Account

An account prepared for manufacturers to calculate and show the cost of manufacturing goods, produced for internal use only.

Production Cost

The cost of manufacturing goods, used in the trading account instead of a figure for purchases of finished goods.

Prime Cost

The sum of direct materials, direct labor, and direct expenses.

Direct Costs

Costs that can be directly traced to the manufacturing of an item.

Indirect Costs

Costs that cannot be easily traced to the item being manufactured and are classified as overheads.

Indirect Manufacturing Costs

Costs occurring in the factory that cannot be directly traced to the items produced, such as rent and utilities.

Administrative Expenses

Expenses related to the administration of the business, including salaries of managers and legal fees.

Selling and Distribution Expenses

Costs associated with selling products, including staff salaries, advertising, and delivery expenses.

Financial Charges

Expenses like bank charges and discounts allowed, related to financial operations.

Manufacturing Account Format

A layout that includes direct materials, direct labor, direct expenses, and indirect manufacturing costs for calculating production costs.

Cost of Raw Materials Consumed

Calculated by adding opening inventory of raw materials to purchases and subtracting closing inventory.

Inventory Adjustments for Work in Progress

Adjusting the opening and closing values of work in progress to find the production costs of goods completed.

Gross Profit

The result of sales minus the cost of goods sold, shown in the trading account.

Wages of Machine Operators

An example of a direct labor cost related to the production of a specific item.

Rent of Factory

An example of an indirect cost that cannot be traced to a specific item being manufactured.