Merchandising and Manufacturing Activities

Merchandising and
Manufacturing Activities
PETTER JAMES C. BENALDO
FM 121
ELEMENTS OF MANUFACTURING COSTS
• Direct Materials- these materials become a
physical part of a finished product.
• Direct Labor- it is the compensation of
employees or workers who physically convert
raw materials into finished goods.
• Manufacturing Overhead- this includes all
manufacturing costs that cannot be classified as
direct materials or direct labor.
Major classifications of this cost follow:
• Indirect materials and supplies
• Indirect labor costs
• Other indirect manufacturing costs
• Prime Costs- consist of direct materials and

direct labor.
• Conversion costs- consist of direct labor and
manufacturing overhead.
Manufacturing Inventory Accounts
• Finished Goods Inventory- it is the cost of completed goods
that have remained unsold at the end of the accounting period.
• Work In Process Inventory- this account gives the cost of the

goods that are in the manufacturing process but are not yet
complete at the end of the accounting period.
• Raw Materials Inventory- this account holds the cost of direct

materials on hand that is intended for use in the manufacturing
process.
• Factory Supplies Inventory- it is the cost of unused indirect

materials at period end.
Accounting for Manufacturing Activities
• Cost system- keeps perpetual records of the
costs of raw material, work in process and
finished goods inventories.
• Non-cost system- produces a manufacturing
system based on the periodic inventory system.
The costs of raw materials, work in process and
finished goods inventories are based on physical
counts of the quantities on hand at the end of
each period.
1. To record purchase of raw materials and indirect
materials on account:
Purchases-raw materials xx
Indirect Materials xx
Vouchers Payable xx
2. To record cost of defective raw materials returned to

vendor:
Vouchers Payable xx
Purchases Returns and Allowances xx
3. To record payment of account within the
discount period:
Vouchers Payable xx
Purchases Discounts xx
Cash in Bank xx
4. To record freight and handling of raw materials:

Transportation In xx
Vouchers Payable xx
5. To record payroll for factory employees:
Direct Labor xx
Indirect Labor xx
SSS Contributions Payable xx
Medicare Contributions Payable xx
Pag-IBIG Contributions Payable xx
Withholding Taxes Payable xx
Vouchers Payable xx
6. To record employer’s payroll expenses

Employer’s Payroll Contributions- Factory xx
SSS Contributions Payable xx
Medicare Contributions Payable xx
EC Contributions Payable xx
Pag-IBIG Contributions Payable xx
7. To record distribution of payroll:
Vouchers Payable xx
Cash in Bank xx
8. To record accrual of factory payroll:

Direct Labor xx
Indirect Labor xx
Accrued Payroll xx
9. To record depreciation of factory building:

Depreciation Expense- Factory Bldg. xx
Accumulated Depreciation- Factory Bldg.
xx
10. To record repairs on factory building:
Repairs and Maintenance- Factory Bldg. xx
Vouchers payable xx
11. To record amortization of patents:

Amortization of Patents xx
Patent xx
12. To record real property taxes on factory site:

Real Property Taxes xx
Vouchers Payable xx
14. To record cost of tools used:
Tools Used xx
Tools xx
15. To record sales of finished goods:

Accounts Receivable xx
Sales xx
16. To record sales returns of customers:

Sales Returns and Allowances xx
Accounts Receivable
xx
17. Closing entries peculiar to manufacturing
concerns:
a. To close manufacturing accounts with credit
balances, and to record ending inventory for materials and
work in process:
Raw Materials Inventory, end xx

Work In Process Inventory, end xx
Purchases Returns and Allowances xx
Purchases Discounts xx
Manufacturing Summary xx
b. To close manufacturing accounts with debit balances:
Raw Materials Inventory, beg. xx
Work In Process Inventory, beg. xx
Purchases- Raw Materials xx
Transportation In xx
Direct Labor xx
Indirect Labor xx
Indirect Materials xx
Depreciation Expense- Factory Bldg. xx
Repairs and Maintenance- Factory Bldg. xx
Amortization of Patents xx
Real Property Taxes xx
Factory Utilities xx
Tools Used xx
Employer’s Payroll Contributions- Factory xx
Factory Supplies Expense xx
Miscellaneous Factory Expense xx
c. To close manufacturing summary and
beginning finished goods inventory to income
summary:
Income Summary xx
Finished Goods Inventory, beg xx
d. To establish the ending finished goods inventory:

Finished Goods Inventory, beg. xx
Income Summary xx
Statement of Cost of
Goods Manufactured
and COGS

Merchandising and Manufacturing Activities

Uploaded by

Copyright:

Available Formats

Merchandising and Manufacturing Activities

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Merchandising and Manufacturing Activities

Uploaded by

Copyright:

Available Formats

Merchandising and

• Prime Costs- consist of direct materials and

• Work In Process Inventory- this account gives the cost of the

• Raw Materials Inventory- this account holds the cost of direct

• Factory Supplies Inventory- it is the cost of unused indirect

2. To record cost of defective raw materials returned to

4. To record freight and handling of raw materials:

6. To record employer’s payroll expenses

8. To record accrual of factory payroll:

9. To record depreciation of factory building:

11. To record amortization of patents:

12. To record real property taxes on factory site:

15. To record sales of finished goods:

16. To record sales returns of customers:

Raw Materials Inventory, end xx

d. To establish the ending finished goods inventory:

You might also like