Trading Accounts & Manufacturing Accounts

Trading and manufacturing accounts refer to accounts used in manufacturing companies.

Trading accounts are used by companies to determine gross profit for a business; while a manufacturing account is used to calculate costs of manufacturing. These two accounts are used together in determining gross profit.

Trading Accounts

Trading accounts contain a summary of all transactions during a trading period. A trading account is an account used to determine the gross profit or gross loss of a trader.

Manufacturing Accounts

Manufacturing accounts are accounts used to calculate the total cost of manufacturing. All costs of production go into this account.

Calculating Trading Accounts

To calculate the balance in a trading account, the difference between the selling price of all goods and the cost of all goods is calculated. The difference between these two numbers is the balance in this account which represents gross profit.

Calculating Manufacturing Accounts

To calculate the balance in this account, all production costs must be placed into the account including raw materials, labor and overhead. The balance in this account represents the cost of goods manufactured.

References

• FAO Corporate Document Repository: Financial, Management Accounting and Reporting
• Download It: The Manufacturing Account
• Accounting for Management: Trading Accounts