Question 4.14: Manufacturing, trading and profit and loss accounts for the ...

Accounting for Business Students

Manufacturing, trading and profit and loss accounts for the year ending …

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Sales			x
Less sales returns			x
			x
Less cost of production
Raw materials
Opening balance	x
Plus purchases and carriage in	x
	x
Less closing balance	x
Cost of raw materials used		x
Plus direct labour		x
Royalties		x
Gives a figure known as prime cost		x
Add factory overheads
Rent and rates*	x
Indirect labour	x
Indirect materials	x
Power	x
Heat and light*	x
Depreciation of plant and equipment	x
		x
Plus opening balance of work-in-progress		x
Less closing balance of work-in-progress		x
Cost of goods produced		x
Plus opening balance of finished goods		x
Less closing balance of finished goods		x
Cost of sales			x
Gross profit			x
Plus
Other revenues
Discount received		x
Rent		x
Interest		x
			x
Less other expenses
Administration	x
Wages/salaries*	x
Stationery	x
Rent and rates etc.*	x
Depreciation of fixtures*	x
		x
Finance	x
Interest	x
Bad debts		x

Selling/distribution	x
Sales salaries	x
Packaging distribution	x
Advertising		x
			x
Profit for the period			x

*Note that these items need to be allocated to the appropriate section. Expenses relating to production should appear in the manufacturing section, while expenses relating to administration should appear in the profit and loss section.

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