MANUFACTURING BUSINESSES

Objectives: Students will be able to;

* Define the different financial statements prepared by manufacturing businesses.

* Identify the components of the financial statements prepared by manufacturing businesses.

* Prepare the financial statements for a manufacturing business.

*SUMMARY NOTE*

A manufacturing business is a business that produces goods by transforming raw materials into finished products. The three main
financial statements prepared by manufacturing businesses are:

* The income statement: This statement shows the revenues, expenses, and profits of a business over a period of time.

* Revenues: The income that a business generates from its sales.

* Expenses: The costs that a business incurs in order to generate its revenues.

* Profits: The difference between revenues and expenses.

* The balance sheet: This statement shows the assets, liabilities, and equity of a business at a point in time.

* Assets: The resources that a business owns.

* Liabilities: The debts that a business owes to others.

* Equity: The difference between assets and liabilities.

* The statement of cash flows: This statement shows the cash inflows and outflows of a business over a period of time.

* Cash flows from operating activities: The cash inflows and outflows that are generated from the normal operations of the
business.

* Cash flows from investing activities: The cash inflows and outflows that are generated from the purchase and sale of assets.

* Cash flows from financing activities: The cash inflows and outflows that are generated from the raising and repaying of debt.

The preparation of the financial statements for a manufacturing business is similar to the preparation of the financial statements for
a non-manufacturing business. However, there are some additional considerations for manufacturing businesses, such as the cost of
goods manufactured and the cost of goods sold.

The cost of goods manufactured is the cost of the raw materials, labor, and overhead used to produce the finished products. The
cost of goods sold is the cost of the finished products that were sold during the period.

The financial statements for a manufacturing business can be used to track the profitability of the business, to assess its financial
health, and to make decisions about its future operations.