26 - 1

Manufacturing Accounting

Chapter 26

26 - 2

Preparing a cost of goods

manufacturing schedule.

Learning Objective 1

26 - 3

ManufacturingRaw materialDirect Labor

Overhead

ManufacturingRaw materialDirect Labor

Overhead

AdministrativeManagement

Sales Personnel Administrative

AdministrativeManagement

Sales Personnel Administrative

Learning Unit 26-1

Manufacturing costs must be separated from all other selling and administrative costs.

26 - 4

Learning Unit 26-1

Direct Materials: Beginning inventory+ Net purchases – Ending inventory= Direct material cost

Work-in-Process Inventory: Beginning inventory+ Direct material cost+ Direct labor+ Manufacturing overhead= Total manufacturing costs– Ending inventory= Cost of goods manufactured

26 - 5

Raw materialsused

Raw materialsused

WIPInventory

WIPInventory

FinishedGoods

Inventory

FinishedGoods

Inventory

Manufacturingoverhead

Manufacturingoverhead

Direct laborDirect labor

Cost of goodssold

Cost of goodssold

Learning Unit 26-1

26 - 6

Beginning merchandise inventory+ Net purchases= Cost of merchandise available for sale– Ending merchandise inventory= Cost of goods sold

Merchandising Co.

Learning Unit 26-1

26 - 7

Beginning finished goods inventory+ Cost of goods manufactured= Cost of goods available for sale– Ending finished goods inventory= Cost of goods sold

Manufacturing Co.

Learning Unit 26-1

26 - 8

Journalizing transactions recording

the manufacturing process.

Learning Objective 2

26 - 9

Learning Unit 26-2

Source documents provide proof of transactions.

Receiving reports acknowledge receipt of goods.

Material requisitions are requests for materials from storage areas.

26 - 10

Received from Adams Company Receiving Report #1031 Date Received: 6/20/0xQuantity Description Unit Price Total Price 50 Gals. Paint $6.50/Gallon $325.00

Inspected By______________________Received By______________________

Received from Adams Company Receiving Report #1031 Date Received: 6/20/0xQuantity Description Unit Price Total Price 50 Gals. Paint $6.50/Gallon $325.00

Inspected By______________________Received By______________________

Receiving Report

26 - 11

Materials Requisition Date: June 20, 200xNumber: 3648From: Finishing DepartmentQuantity Description Unit Price Total Price 8Gal. White Paint $6.50/Gallon $52.00Inspected By _______________________Received By________________________

Materials Requisition Date: June 20, 200xNumber: 3648From: Finishing DepartmentQuantity Description Unit Price Total Price 8Gal. White Paint $6.50/Gallon $52.00Inspected By _______________________Received By________________________

Materials Requisition

26 - 12

Learning Unit 26-2

Clock cards list time worked for each employee for specific activities.

Lot tickets reflect movement of products through the manufacturing floor.

Labor distribution reports track the hours and dollars of labor to departments and products.

Bills of lading are shipping documents.

26 - 13

Learning Unit 26-2

Flow charts illustrate the movement of the material, labor, and overhead through the operation.

They support journal entries. Overhead – Control is debited as costs are

incurred. Overhead – Applied is credited when

overhead is applied to products.

26 - 14

Debit Work-in-Process InventoryCredit Raw Material Inventory

Debit Work-in-Process InventoryCredit Raw Material Inventory

Debit Work-in-Process InventoryCredit Payroll

Debit Work-in-Process InventoryCredit Payroll

Debit Overhead – ControlCredit Supplies Inventory

Debit Overhead – ControlCredit Supplies Inventory

Learning Unit 26-2

26 - 15

Debit Overhead – ControlCredit Payroll

Debit Overhead – ControlCredit Payroll

Debit Overhead – ControlCredit Supervision Salaries

Rent Expense Depreciation Expense Electricity Expense

Debit Overhead – ControlCredit Supervision Salaries

Rent Expense Depreciation Expense Electricity Expense

Learning Unit 26-2

26 - 16

Debit Work-in-Process InventoryCredit Overhead – Applied

Debit Work-in-Process InventoryCredit Overhead – Applied

Debit Finished Goods InventoryCredit Work-in-Process Inventory

Debit Finished Goods InventoryCredit Work-in-Process Inventory

Debit Cost of Goods SoldCredit Finished Goods Inventory

Debit Cost of Goods SoldCredit Finished Goods Inventory

Learning Unit 26-2

26 - 17

Preparing a worksheetfor a manufacturing

company.

Learning Objective 3

26 - 18

Learning Unit 26-3

The worksheet for a manufacturing company is used to produce the following:

– Statement of cost of goods manufactured– Income statement– Statement of retained earnings– Balance sheet

26 - 19

Statement ofRetained Earnings

Statement ofRetained Earnings

BalanceSheet

BalanceSheet

Cost of Trial Adjust. Goods Income BalanceBalance Manufactured Statement Sheet

IncomeStatement

IncomeStatement

Statement of Cost ofGoods ManufacturedStatement of Cost ofGoods Manufactured

Learning Unit 26-3

26 - 20

End of Chapter 26