Manufacturing Account

When it is needed

For manufacturers, to find the cost of production, which then replaces "Purchases" of finished goods in the Trading Account.

Format

Opening stock of raw material            2,00,000
+ Raw material purchased                 9,00,000
− Closing stock of raw material         (1,50,000)
= Raw material consumed                  9,50,000
+ Direct wages                           2,00,000
+ Factory overheads (power, factory rent,
  repairs, depreciation on plant)        1,50,000
+ Opening work-in-progress                 80,000
− Closing work-in-progress               (1,00,000)
= Cost of production                    12,80,000   → to Trading A/c

Any sale of scrap is deducted from the cost of production.

In Hisab Central

Keep raw materials, work-in-progress and finished goods in separate stock groups, and factory expenses under Direct Expenses, so the Trading and P&L reports stay meaningful.