What Is Manufacturing Accounting?

Manufacturing businesses source raw materials and transform these into new products. The process entails the use of labor, machinery, tools, and a variety of raw materials. In this business setup, it is easy for other non-core functions like accounting to be ignored which can lead to debilitating financial consequences.
Manufacturing Accounting
Manufacturing Accounting

Unlike a merchandising company that only handles complete items, your business has to deal with inventory valuation and the cost of goods sold. The statement used in a manufacturing business differs from that of any other business as it includes the cost of direct materials and labor and other production overhead.
To do this, we open a cost of goods manufactured account that will include:
  • Direct materials: This account reflects all the materials your company sources and uses to make a product.
  • Work in process: This includes goods or products in the production line. The work-in-process inventory tracks the cost of each product in the production line.
  • Finished goods: This is the inventory of costs associated with a complete product that has not yet been sold. The costs will include storage expenses and other associated expenses.

At Rayvat Accounting, we appreciate that your business is more focused on getting products to market at the earliest time possible. We work closely with you to account for all expenses your company incurs while making products for resale.


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