In the trading account of a manufacturing company, the production cost figure (as calculated by drawing up the manufacturing statement) should be used in place of the purchases figure.

Opening stock of finished goods should be added to production cost (or cost of goods manufactured) to arrive at the value of goods available for sale.

The value of the closing stock of finished goods should be deducted from this figure in order to calculate the cost of goods sold during the year.

Example

The following information is available from the books of a manufacturing company. Using this information, prepare the company’s manufacturing statement and income statement (in vertical form).
Trading Account of a Manufacturing Concern

Solution

Working and Calculations
Manufacturing Statement
Income Statement

Frequently Asked Questions

What is a manufacturing and trading account?

A manufacturing and trading account (mta) is an account that allows you to track your business income and expenses related to the manufacture and sale of products.

What are the benefits of using an MTA?

There are several benefits of using an mta, including tracking business income and expenses related to the manufacture and sale of products, easier bookkeeping and tax preparation, and simplified reporting requirements.

Can I use a manufacturing and trading account if I am not a manufacturer, wholesaler, or retailer?

Yes, you can use a manufacturing and trading account if you are not a manufacturer, wholesaler, or retailer. However, the account will be most useful to you if you are in one of these businesses.

How do I set up a manufacturing and trading account?

To set up a manufacturing and trading account, you will need to contact your accountant or tax advisor. They will help you set up the account and provide guidance on how to use it for your business.

How do you prepare a manufacturing trading profit and loss account?

To prepare a manufacturing and trading profit and loss account, you will need to track the income and expenses related to your mta. This information can be used to prepare a statement of profit or loss for your business.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

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