Manufacturing Account: Terminologies Used - SS2 Accounting Lesson Note

In a manufacturing account, certain terminologies are used to provide a detailed breakdown of the costs associated with the production process and to analyze the profitability of the manufacturing operations. Some of the terminologies used include:

• Raw Materials: The cost of the materials that are used in the production process.

• Direct Labor: The cost of the workers who are directly involved in the production process.

• Manufacturing Overhead: The indirect costs associated with production, such as rent, utilities, and equipment.

• Work in Progress: The value of goods that are still being produced and have not yet been completed.

• Finished Goods: The value of goods that have been completed and are ready to be sold.

• Cost of Goods Sold: The total cost of the goods that have been sold during the accounting period.

• Gross Profit: The difference between the revenue generated from the sale of goods and the cost of goods sold.

• Net Profit: The amount of profit after deducting all expenses from the revenue generated.

• Closing Inventory: The value of the inventory at the end of the accounting period.

• Cost of Sales: The total cost of the goods that have been sold during the accounting period, including the cost of raw materials, direct labor, and manufacturing overhead.