Assalamualaikum and hi,
We often heard about trading, profit and loss accounts, and most exercises so far were focusing on those topics. Well, let me introduce you guys to one of accounts that you might be doing later in the future.
Some businesses are doing just buying and selling activities. Buying goods and sell those goods with immediate profits. Somehow, if you think further, goods need to be produced first before they are being shelved for display. For example, if you want to sell fashion clothes to customers, what people normally do is... buy the clothes from the wholesaler and then sell them to customers. If this is the case, the business only need to construct a trading profit and loss account. Some businesses they have to manufacture the clothes, create them from a piece of cloth, stitch them, cut them. They need to have a roll of textile in order to produce the clothes. Moreover, they need people to cut them, trim them, stitch them and other expenses directly associated in producing the clothes. Not only that, they have to take in account the inventory of raw materials (cloth), the work-in-progress (the clothes without pockets/collar etc) and also the finished goods (the clothes ready for sale). In summary, they need a factory to do that. That is why we need to learn manufacturing accounts.
So the definition of Manufacturing Account is......
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