Manufacturing Account

The primary object of accounting is to arrange accounting data in a

manner that the amount of profit or loss can be ascertained. It is
prepared for a fixed period. For this purpose, we prepare the final
accounts. Non-manufacturing entities or the trading entities are
engaged in the purchase and sale of goods at profit without changing
the form of the goods. Generally, Manufacturing entities prepare a
separate Manufacturing Account as a part of Final accounts in
addition to Trading Account, Profit and Loss Account and Balance
Sheet.

Manufacturing account
The main purpose of preparing Manufacturing Account is to
determine manufacturing costs of finished goods. It helps in
improving the cost-effectiveness of manufacturing activities. The
costs of finished goods are then transferred from this Account
to Trading Account.

How is it different from trading Account?

The trading account shows Gross Profit while Manufacturing

Account shows the cost of goods sold which includes direct
expenses.

Manufacturing account deals with the raw material and work-in-

progress while the trading account would deal with finished goods
only.