Introduction to Manufacturing Accounts
Manufacturing of goods is the transformation of raw materials into finished goods. Some firms have to manufacture their products before they are sold to the public e.g. Cocacola, Nestle, and Cadbury.
The scope of activities of a manufacturing organization is wider than that of a merchandising firm. A merchandising firm merely sells products which are acquired in a finished form while a manufacturing firm produces and sells. They acquire raw materials, engage labour services, and other inputs to ensure that the raw materials are changed into finished goods.
Purpose of Manufacturing Accounts
1. To ascertain the cost of goods manufactured.
2. To ascertain the amount of any profit on the manufacturing process.