For example, the automotive manufacturer is made of steel, rubber, aluminum, plastic, etc. Purchases used for the sale of motor vehicles sold by merchants (commercial affairs). These dealers sell the vehicles to the customer
Accounting is very similar to the manufacturing and commercial activities, especially administration, sales and financing. Therefore, accounting principles and most procedures can be applied to both manufacturing and trading concerns. The two main differences are the accumulation of costs and the definition of costs (1) inventory valuation and (2) calculation of the cost of the products sold. The difference is due to the fact that commercial companies buy end products while manufacturers sell products sold by traders.
The manufacturing cost of "manufactured goods" therefore corresponds to the settlement cost of "purchased goods" in commerce. In both cases, these amounts represent the cost of the finished products available for sale. After purchasing the goods in a "ready" form, the commercial enterprise has little difficulty in determining the cost. However, the manufacturing undertaking must take into account the cost of converting raw materials into finished products (also as manufacturing costs).
When converting raw materials into finished products, the manufacturer uses labor, machinery and equipment, as well as other manufacturing costs, power consumption, maintenance of machines, etc. All these costs should be added to the cost of raw materials to determine the price of manufactured products for any period
. the accounting records of the manufacturing company should be extended in order to fix the specific additional costs of the manufacturers
The three most important components of manufacturing costs are material, labor and manufacturing costs. In accounting cost accounting, financial and labor costs are commonly recognized as primary costs, while accounting conversion costs are a combination of labor and general production costs.
Due to the nature of the manufacturing business, there are more accounting accounts than a commercial business. The accountant must have aspects such as machines and equipment, inventories, raw materials, work in progress, finished products, etc. Particular attention should be paid to the various inventory accounts
. the manufacturer must make a variety of kits in the kit: the set of materials is ready for use during the manufacturing process; production of partially manufactured products is in progress; and the finished products that need to be sent to traders. Stock inventory records and various accounting records must be kept in order to determine each type of inventory at the end of the financial period. All three inventory bills are accounted for and are usually held in a durable accounting system. However, audit accounts supported by the records of the respective subsidiaries