FINANCIAL STATEMENTS OF MANUFACTURING CONCERN

financial accounting accounting  FINANCIAL STATEMENTS OF MANUFACTURING CONCERN

In this lecture, we will discuss financial statements of manufacturing concern. In manufacturing concern, cost of goods sold statement is also prepared.

Illustration #1

Following trial balance has been extracted from the books of Hassan Manufacturing Concern on June 30, 2002.

Hassan Manufacturing Concern

Trial balance As on June 30, 2002

Particulars
Amount Dr. (Rs.) Amount Cr. (Rs.)
Raw Material stock Jul. 01, 2001
35,500
Work in process Jul. 01, 2001
42,000
Finished goods stock Jul. 01, 2001
85,000
Raw material purchased
250,000
Wages
180,000
Freight inward
12,000
Plant and machinery
400,000
Office equipment
45,000
Vehicles
200,000
Acc. depreciation Plant

195,200
Acc. depreciation Office equipment

12,195
Acc. depreciation Vehicles

97,600
Factory overheads
125,000
Electricity
80,000
Salaries
140,000
Salesman commission
120,000
Rent
200,000
Insurance
150,000
General Expense
60,000
Bank Charges
8,500
Discounts Allowed
20,000
Carriage outward
35,000
Sales

1,500,000
Trade Debtors
250,000
Trade Creditors

220,000
Bank
165,000
Cash
110,000
Drawings
175,000
Capital July 01, 2001

863,005
Total
2,888,000 2,888,000

Notes:

• Stock on June 30, 2002.

  1. Raw Material 42,000
  2. Work in Process 56,500
  3. Finished Goods 60,000
  • 50% of electricity, insurance and salaries are charged to factory and balance to office.
  • Depreciation to be charged on Plant & Machinery at 20%, Office Equipment at 10% and Vehicles at 20%on WDV.
  • Write off bad debts Rs. 30,000.
  • All the wages are direct expense.

Required:

You are required to prepare profit and loss account for the year and balance sheet as on june30, 2002.

Solution Profit & Loss Account

Hassan Manufacturer Concern
Profit and Loss Account For the Year Ending June 30, 2002
Particulars Note Amount Rs.
Sales Less: Cost of Goods Sold 1 1,500,000 796,960
Gross Profit Less: Administrative Expenses 2 Less: Selling Expenses 3 703,040 518,761 155,000
Operating Profit 29,279
Less: Bank Charges 8,500
Net Profit Before Tax 20,779

Balance Sheet


Hassan Manufacturer Concern

Profit and Loss Account For the Year Ending June 30, 2002
Particulars Note Amount Rs.
Fixed Assets at WDV 4 275,284
Current Assets Current Liabilities 5 6 653,500 (220,000)
Working Capital Total Assets Employed Financed by: Capital Add: Profit for the year Less: Drawings Total Liabilities 433,500 708,784 863,005 20,779 (175,000) 708,784
Notes to the Accounts Note # 1 Cost of Goods Sold Stock of Raw Material Jul 01, 2001 35,500 Add. Purchases 250,000 Add. Freight Inward 12,000 297,500 Less: Closing Stock of Raw Material (42,000) Raw Material Consumed 255,500 Direct labor 180,000 Factory Overheads Factory Overheads 125,000 Electricity (50% of 80,000) 40,000

Salaries (50% of 140,000) 70,000 Insurance (50% of 150,000) 75,000 Plant Depreciation (Note 5) 40,960 350,960

Total Factory Cost 786,460

Add: Work in Process Jul 01, 2001 42,000 Less: Work in Process Jun 30, 2002 (56,500)

Cost of Goods Manufactured 771,960

Add: Finished Goods Stock Jul 01, 2001 85,000 Less: Finished Goods Stock Jun 30, 2002 (60,000)

Cost of Goods Sold 796,960

Note # 2 Administrative Expenses

Salaries (50% of 140,000) 70,000 General Expenses 60,000 Rent 200,000 Insurance (50% of 150,000) 75,000 Discount Allowed 20,000 Bad Debts 30,000 Office Electricity (50% of 80,000) 40,000 Depreciation Vehicles (Note 5) 20,480 Depreciation Office Equip. (Note5) 3,281

Administrative Expenses 518,761

Note # 3 Selling Expenses

Salesman Commission 120,000 Carriage Outward 35,000

Selling Expenses 155,000

Note # 4 Fixed Assets at WDV

Acc. Depreciation WDV Cost Rate Opening For the year Closing

Plant & Mach. 400,000 20% 195,200 40,960 236,160 163,840 Vehicles 200,000 20% 97,600 20,480 118,080 81,920 Office Equipment 45,000 10% 12,195 3,281 15,476 29,524

64,721 275,284 Note # 5 Current Assets

Stock Raw Material 42,000 Work in Process 56,500 Finished Goods 60,000 158,500

Debtors 250,000 Less: Bad Debts (30,000) Bank 165,000 Cash 110,000

Current Assets 653,500

Note # 6 Current Liabilities

Trade Creditors 220,000

Illustration # 2

Following trial balance has been extracted from the books of Javed Furniture Manufacturers on June 30, 2002.

Javed Furniture Manufacturers

Trial balance As on June 30, 2002

Particulars Amount Dr. (Rs.) Amount Cr. (Rs.)
Raw Material stock Jul. 01, 2001 52,500
Work in process Jul. 01, 2001 97,250
Finished goods stock Jul. 01, 2001 33,750
Raw material purchased 925,000
Wages 812,500
Freight inward 8,750
Plant and machinery 700,000
Office equipment 50,000
Acc. depreciation Plant 125,000
Acc. depreciation Office equipment 20,000
General factory overheads 77,500
Office electricity 18,750
Factory power 34,250
Salaries administrative staff 110,000
Salaries sales staff 75,000
Salesman commission 28,750
Rent 30,000
Insurance 10,500
General Admin. Expense 33,500
Bank Charges 5,750
Discounts Allowed 12,000
Carriage outward 14,750
Sales 2,500,000
Trade Debtors 355,750
Trade Creditors 312,500
Bank 142,000
Cash 21,250
Drawings 50,000
Capital July 01, 2001 742,000
Total 3,699,500 3,699,500

Notes:

  • Stocks on June 30, 2002
  1. Raw Material Rs. 60,000
  2. Finished Goods Rs. 100,000
  3. Work in Process Rs. 37,500.
  • Out of total wages Rs. 450,000 is direct and balance indirect.
  • 80% of Rent and Insurance are to be apportioned to factory and balance to administrative office.
  • Depreciation to be charged on Machinery at 20% and Office Equipment at 10% on cost.

You are required to prepare profit and loss account for the year and balance sheet as on june30, 2002.

Solution

Javed Furniture Manufacturer
Profit and Loss Account For the Year Ending June 30, 2002
Particulars Note Amount Rs.
Sales Less: Cost of Goods Sold 1 2,500,000 2,016,400
Gross Profit Less: Administrative Expenses 2 Less: Selling Expenses 3 483,600 175,350 118,500
Operating Profit 189,750
Less: Financial Charges 4 17,750
Net Profit Before Tax 172,000

Javed Furniture Manufacturers

Balance sheet For the Year Ending June 30, 2002
Particulars Note Amount Rs.
Fixed Assets at WDV 5 460,000
Current Assets Current Liabilities 6 7 716,500 (312,500)
Working Capital Total Assets Employed Financed by: Capital Add: Profit for the year Less: Drawings Total Liabilities
404,000 864,000 742,000 172,000 (50,000) 864,000
Working 1 – Cost of Goods Sold
Stock of Raw Material Jul 01, 2001 Add. Purchases Add. Carriage InwardLess: Closing Stock of Raw Material Raw Material Consumed Direct labor Factory Overheads General Factory Overheads Power Rent (80% of 30,000) Insurance (80% of 10,500) Plant dep. On cost (Note 5) Indirect Labor Total Factory Cost Add: Work in Process Jul 01, 2001 Less: Work in Process Jun 30, 2002 Cost of Goods Manufactured Add: Finished Goods Stock Jul 01, 2001Less: Finished Goods Stock Jun 30, 2002 Cost of Goods Sold 77,500 34,250 24,000 8,400 140,000 362,500 52,500 925,000 8,750 986,250 (60,000) 926,250 450,000 646,6502,022,900 97,250 (37,500) 2,082,650 33,750 (100,000) 2,016,400
Working 2 – Administrative Expenses
Administrative SalariesRent (20% of 30,000) Insurance (20% of 10,500) General Admin Expenses Office Electricity Depreciation Office Equip. (Note5) Administrative Expenses 110,000 6,000 2,100 33,500 18,750 5,000 175,350
Working 3 – Selling Expenses
Salesman’s Salary Commission on Sales Carriage Outward Selling Expenses 75,000 28,750 14,750 118,500
Working 4 – Financial Expenses
Bank Charges Discount Allowed Financial Expenses 5,750 12,00017,750
Working 5 – Fixed Assets at WDV
Cost Rate Acc. DepreciationOpening For the year closing WDV
Plant and Mach. Office equipment. 700,000 50,000 20% 125,000 10% 20,000 140,000 5,000 145,000 265,000 25,000 435,000 25,000460,000
Working 6 – Current Assets
Stock Raw Material Work in Process Finished Goods DebtorsBankCash Current Assets 60,000 37,500 100,000 355,750 142,000 21,250 716,500
Working 7 – Current Liabilities
Creditors 312,500
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