Manufacturing Accounts

Hazel Thomson

Hello,
I have just taken on a company who buy in lorries and either use the parts from it to re-build other lorries into fuel tankers or strip them down to the chassis and use the parts bought in or from stock to re-build into tankers. When the lorries are complete they are usually rented out to customers but sometimes just sold.

They have not had any internal management accounts made up before but they want this now so I have no guide.

I have to make up a set of management accounts from scratch, I'm just learning about the business and I think that I need to set up a Manufacturing Account then Trading & Profit and Loss Account.

I know that at present the Lorries are posted to Assets when they are purchased but I would have thought that they should have been posted to purchases bought In (raw materials) and then be part of the Manufacturing Account.

I thought that when the lorry is a complete tanker it will then become stock of finished goods until it is sold or rented when it will then become an Asset.

can anyone tell me what the correct treatment should be?

Thank you.