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Thread: OVERVIEW: ABOUT MANUFACTURING ACCOUNT AND CONTROL ACCOUNTS

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    Default OVERVIEW: ABOUT MANUFACTURING ACCOUNT AND CONTROL ACCOUNTS

    OVERVIEW: ABOUT MANUFACTURING ACCOUNT AND CONTROL ACCOUNTS

    Accounting is the process of recording, classifying, selecting, measuring, interpreting and communicating financial data of an organization to enable users make decision. It incorporates measurement and reporting of profit and loss. An accountant must not only be interested in record keeping alone but in the application of his professional competency or knowledge and skill in presenting accounting information to assist management decision making. It's therefore irresistable not to make use of this accounting principles, knowledge and measures in all spheres of life such as manufacturing and in control of organizatons. To this effect we shall discuss account as it as to do with manufacturing and control of organizatons.
    MANUFACTURING ACCOUNT
    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 Coca Cola, Nestle and Cadbury. Whereas some merely sell products which are acquired in a finished form. A manufacturing organization will acquire raw materials, engage labour and other inputs necessary to change the raw materials into finished goods. Manufacturing accounts are in essence prepared to ascertain the cost extents of goods manufactured during the financial year of a manufacturing company, which makes It's an extension of the trading account.
    PURPOSE OF MANUFACTURING ACCOUNT
    The purpose of the manufacturing accounts include the following:
    1: To ascertain the cost of the goods manufactured in a fiscal year.
    2. To ascertain the amount of any profit on the manufacturing process.
    The manufacturing account covers the details of cost of production, Non manufacturing cost, and a host of other details.
    COST OF PRODUCTION:
    This is the total expenditure incurred in the production of output. This is obtained by taking into account the total expenses which relate to the manuacturing process. It includes prime cost and factory overheads
    Prime cost: These are cost that can be traced to a particular production unit e.g . They are directly related to the manufacturing process. These are:
    1. Direct materials
    2. Direct labour
    3. Direct expenses

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    4. Other direct expenditure.
    Direct materials: This expenditure incurred on raw materials which can be traced to a particular production unit e.g orange in fanta making unit.
    Direct labour: This refers to the wages of employees who are directly engaged in the production process as e.g wages of machine operator.
    Direct expenses: These are expenses which have direct identification with the production e.g royalties.
    Factory overheads: These relate to expenditure incurred in running the factory which cannot be traced to a particular production unit. They are indirect costs consumed during production processes e.g
    i Factory rent and rates
    i. Depreciation of plant and machinery
    iii. Indirect wages
    iv. Upkeep of factory building etc.
    Since the manufacturing account is mainly concerned with expenses, all the items appear on the debit side, such as:
    Work in progress: This can be defined as the partly finished goods or incomplete work. The cost of production must be adjusted for work in progress at the beginning and end of the year.
    Cost of raw materials consumed: This is the cost of raw materials which have been used up in the manufacturing process. This will be found by:
    1. Taking opening stock of raw materials
    2. Adding purchases of raw materials
    3. Deducting closing stock of raw materials.

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    Non manufacturing cost: These are selling, distribution and administrative expenses which are used up in the production process. The expenses will appear on the debit side of profit and loss account for the period.
    TRANSFER PRICING: The goods manufactured may be charged to the trading account at the actual factory cost or at the current market value in order to obtain a separate profit on the manufacturing process. The manufacturing account will show a balance which will represent a profit or loss on production and will be transferred to profit and loss account. This is credited to themanufacturing account and debited to trading account. The net profit will not be affected.
    Note: Since the goods were transferred to the sales department at the net realizable value, there will be gross profit on manufacture and gross profit on trading.

    CONTROL ACCOUNTS
    In big organizatons, many ledgers are kept for debtors and creditors. Because of the large number of ledgers used in the preparation of accounts, errors may be difficult to locate. In order to reduce the time involved in locating errors, it is convenient and desirable to adopt a System whereby each ledger can be balanced independently of others. Control accounts can be employed for this purpose.
    Control accounts can now be defined as memorandum account, the balance of which reflects the aggregate balances of many related subsidiary accounts which are part of the double entry system. It is the account to which is debited and credited the total amounts of all the transactions which have been debited and credited in details to individual debtors and creditors ledgers. Control accounts are not necessarily part of the double entry system. They perform the function of a trial balance to a particular ledger. They are kept for customers (Sales ledgers) account and suppliers (Purchase ledgers) account,

    ADVANTAGES OF CONTROL ACCOUNTS
    1 Control accotunts helps in locating errors.
    2. It can provide a check on the accuracy of balances of the ledgers.
    3. Fraud will become difficult to cry out.
    4. The balances of the total debtors and creditors can be easily calculated.
    5. They can be used to detect missing figures in an account presentation.
    6. They save time.

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    7 They allow homogenous accounts to be grouped together.
    Division of control accounts
    1. Total Debtors Control Account or Sales Ledger Control Account.
    2. Total Creditors Control Account or Purchases Ledger Control Account
    CONTRA ENTRIES: The Contra entries occur when a supplier is also a customer. The firm can sell on credit to a customer and buy on credit from the same person. The inter-indebtedness will be set-off against each other. At the end of the month the smaller of the two balances will be set-off against the larger balance.
    SALES LEDGER CONTROL ACCOUNT
    This is the control account for sales ledger. It can be referred to as total debtors control accounts.

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    Manufacturing Account.

    A manufacturing account is one of the most important parts of a small business and one that can make or break your business. It is important for businesses to have an accounting system so that it functions as smoothly as possible. Whether you are running a small business or a big business, having a good manufacturing account is vital in order to keep track of your accounts and to help make sure that you always have the right information on hand.

    To start, a good manufacturing account should always have at least two separate accounts. The first of these is known as the inventory. This is where you store all the different raw materials, raw products, and finished goods that you sell. All of the different types of these goods need to be tracked so that you can keep track of where the sales are coming from and where the customer's purchases are going to end up.

    The second type of account is called the manufacturing unit. This is simply a way of categorizing the different products that your company makes. Each product can be assigned to its own account, which is very useful if you want to keep track of your overall accounts and the different products that you have. This will allow you to keep track of the overall production of the company and can also allow you to easily track the various products that are going into the line.

    There are several great features that come with having a good manufacturing account. One of the best features is that you can keep track of what is being sold and how many people are buying them. Having this information will allow you to know whether your product is working and is gaining any popularity. This is also very helpful in case you want to change your products or even to adjust the prices of your products in order to keep them competitive.

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    Another very important feature to have is one that will keep you organized. Most companies will just get rid of the ledger book and put everything in a single file box. This may not always be the best way to go about it, but with good manufacturing account it can actually be very helpful because it will allow you to keep everything organized.

    One more feature that many small business owners often forget about when they are dealing with their accounts is their profit and loss account. This is simply the difference between the profit and the loss that your business made in a certain period of time. In order to keep track of this information, it is important to have separate books so that you can see all of the profit and all of the loss in the same day.

    These are just a couple of the great features that you will find with having a good manufacturing account. There are a number of other great features that you can use with the system that you already have, but you might want to take a closer look at the ones that you have. As long as you can remember that you have a good manufacturing account there is no reason for you to not be able to manage your accounts well. Remember that this is the only way that you will know what is going on so that you can make sure that you are able to deal with your accounts as effectively as possible.

    Remember that there are a number of different options out there that are available to you. Many people prefer to get the software that is designed for companies who have a lot of different accounts to handle their accounts. This means that you will need to do a little bit of searching on the internet before you decide on which one you want to get. Once you have found the software that you like you can then install it into your existing system and then use it to run your business easily.

    What is a control account?

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    A control account is simply an account in the accounting system where a corresponding subsidiary ledger is created. The subsidiary ledger then allows for tracking multiple transactions on the account. These types of accounts are referred to as a subaccount in some cases. The accounts have their own names and will typically be listed under a different account that has a lower number such as the cash account or the investment account. A company will normally have one account that contains all of their cash accounts.

    An account will typically be held on a balance sheet that represents the balance of each line item in a company's books. There are generally two types of balances. One is the net income or profit of the entity and the other is the net debt or liability of the entity. Typically these types of accounts are used to track the various ways that the cash flow of an organization is being managed. For example, when a company buys a product, they may want to know how the capital cost of purchasing the product was calculated. This information is then tracked on a subsidiary ledger to see what the cost per transaction (CPT) was.

    Generally, control accounts have no set amount in place for the money flow, and it is up to the accounting process to determine this. In some cases, this will occur when the business is at a loss, or they are looking to take on new customers. It will be determined by the accountant to make sure that the entity has the ability to pay all of their bills in a timely fashion.

    Some companies that handle control accounts often utilize a number of different types of accounts to record different aspects of the business. This can include a sales order account to record the payment of a sale, as well as a credit card order account to record the payment of a purchase. These accounts will also record the credit card transactions for an organization as well as the amounts that were paid.

    Sometimes credit card accounts will have been closed out when a sale takes place. The closing of the account will be recorded on the subsidiary ledger to show how many credit cards were canceled. As long as the amount of credit cards being canceled does not exceed the balance, the account will be closed out.

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    A card account will usually close out when the card is used for the first time. However, if a card has never been used before, it may continue to carry the balance for several days. If the company makes a charge from one of their credit card accounts, it will be recorded on the account. When the charge is settled, the cash flow of the organization will show an income or net income for the organization. This can be used as a basis for making decisions about the accounts.

    Cash flow can also be used to determine how much inventory an entity needs to purchase. In this case, it will be the income or net income of the entity that determines whether or not it needs to purchase more inventory. in the future.It is up to the corporation to decide what assets the company should keep and which ones should be eliminated. In the event that a company decides to purchase more inventory, then they may sell those assets. to another company to purchase it.

    Control accounts is used to track the income or net income that an organization has received or made. A company will be able to see whether or not the assets of an organization are being used properly. This can be done in one of two ways.The first way is through asset management, where an accountant will make sure that there are a sufficient amount of assets for the organization's needs. The second is through cash flow accounting where the cash flow of an organization will be determined in the current month.

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