Manufacturing Accounts

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Can anyone please help me with Manufacturing A/cs(Intermediate level). I am not sure which figures in the Trading Alc to inflate with a factory profit, and also how to adjust for the unrealised profit at the end of the Trading A/c.<BR>I would appreciate any help. Thanks.

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Manufacturing Accounts

    Any factory profit should be added on to the production cost in the manufacturing account. The "inflated" figure is then brought forward to the trading account. OPening and closing stocks of finished goods will already be quoted at the cost+profit value.<BR><BR>You will then need to make a provision for unrealised profits contained in the closing stock. To calculate the amount of the provision needed divide the closing stock by 100+the profit percentage mark-up and multiply by the profit percentage mark-up. E.g clsoing stock is £12,000 and is valued at cost + 20%. The provision needed is therefore £12,000/120 x 20 = £2,000.<BR><BR>Finally, remember that there will probably already be an existing provision and all you need to do is include the change in the provision in the profit and loss account (but deduct the total provision from the stock in the balance sheet). In many ways this provision is similar to the provision for doubtful debts.<BR><BR>Graham Blott
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Manufacturing Accounts

    Thanks very much for that Graham. Do I need to include the factory profit figure on the credit side of the Trading A/c after the cost of goods sold figure has been deducted from Sales, but before the adjustment for unrealised profit?
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Manufacturing Accounts

    Add the factory profit onto the gross profit on trading (on credit side of the profit and loss account)

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